Oil prices are down significantly this morning, reaching as low as $100.68. As Russian oil supply continues to be disrupted by sanctions, the effects are spreading, as evidenced by the Kazakhstan supply issues. Russia’s invasion of Ukraine set off a domino effect throughout the oil supply chain, and now those dominos are falling for producers in other areas as well.
Last week we reported on damage to the Caspian Pipeline Consortium (CPC) caused by a storm in the Black Sea. You can find that article here. The pipeline, which pumps out around 1.2 million barrels per day (bpd) to the Black Sea is undergoing repairs, but the oil it pumped – predominantly from Kazakhstan – is stuck until operations resume. While the United States and other western countries are struggling to keep pace with demand, Kazakhstan crude production has been declining in recent days, which could spell out problems for the East going forward. With Kazakhstan set to lose around a fifth of their oil production this month from the pipeline damage, coupled with Russian oil sanctions impacting fuel supply and demand, the future does not look promising.
However, there does seem to be some light at the end of the tunnel. Russia today promised peace talks to reduce military operations in areas around Kyiv. While the word “promise” does not hold much value given Russian deceptions over the past two months, it is a stepping stone to what could be the eventual de-escalation of a drawn-out conflict. You can find more information on what today’s peace talks entail here. An unprovoked Russian invasion of Ukraine was the first domino to fall, followed by sanctions, and then the disruption of a major eastern pipeline. What will fall next?