In Tuesday’s trading session, oil markets exhibited a state of equilibrium following a session of gains, as the investment community recalibrated their outlook on the implications of diminished refinery operations in Russia due to Ukrainian offensives. Concurrently, a marginal dip in the U.S. dollar’s strength lent some support to oil prices.

As of early morning, Brent crude futures for May slightly decreased by 6 cents to $86.69 a barrel, while U.S. West Texas Intermediate (WTI) crude futures saw a minimal reduction of 4 cents, positioning at $81.91 a barrel. This stability follows a session where Brent and WTI respectively ascended by 1.5% and 1.6%, spurred by Russia’s directive for oil companies to taper production in alignment with OPEC+ commitments, targeting a 9 million barrels per day output.

Russia, a leading global oil producer and exporter, grapples with the aftermath of Ukrainian strikes on its oil refineries—a scenario that Goldman Sachs analysts estimate has sidelined approximately 900,000 barrels per day of refining capacity, potentially for extended periods.

Analysts highlight the dual impact of these refinery disruptions on crude prices: a bearish influence stemming from reduced refinery demand juxtaposed with bullish sentiments due to anticipated declines in Russian oil exports.

Further intensifying the market’s dynamics was the recent drone assault on a Rosneft facility, leading to the shutdown of a 70,000 barrels per day crude unit at the Kuibyshev refinery in Samara.

Amid these developments, the U.S. dollar’s slight weakening has provided a cushion for oil prices, as a less robust dollar typically lowers the cost barrier for non-dollar-denominated oil purchases, potentially invigorating demand.

Market analyst Tina Teng posits that the dollar may persist in facing downward pressures with the anticipated Federal Reserve rate cuts later in the year, potentially injecting bullish momentum into oil markets.

Moreover, the ongoing conflict between Israel and Gaza introduces a geopolitical risk premium, further influencing oil prices, though the direct impact on Middle Eastern oil supplies remains uncertain.

Senior market analyst Kelvin Wong of OANDA underscores the geopolitical risk premium’s significant role in supporting oil prices, particularly in light of the absence of a clear ceasefire in the Israel-Hamas conflict.

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