Oil Trades Little Changed as Markets Weigh Russian Supply Woes against Weaker Dollar

Oil was little changed on Tuesday, after rising in the previous session, as investors took a more mixed view toward the loss of Russian refinery capacity after recent Ukrainian attacks, though a slightly weaker U.S. dollar offered some support. Brent crude futures for May slipped 6 cents to US$86.69 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 4 cents to US$81.91 a barrel at 0701 GMT.

Brent rose 1.5% in Monday's session while WTI gained 1.6% higher after Russia's government ordered companies to cut output in the second quarter to meet a 9 million barrels per day (bpd)target to comply with pledges to the OPEC+ consumer group. Russia, a top three global oil producer and one of the largest exporters of oil products, is also contending with recent attacks on its oil refineries by Ukraine that Goldman Sachs analysts said has knocked about 900,000 bpd of capacity offline, possibly for weeks and even in some cases permanently.

"The impact of refining disruptions on crude prices is mixed, with a bearish effect from the decline in refinery demand and a bullish effect from the potential reduction in Russia oil exports," the analysts said in a note. After a Ukrainian drone attack on Saturday, Russian oil producer Rosneft shut a 70,000 bpd crude unit at its Kuibyshev refinery in the city of Samara. While the consequences of the attacks and Russian cuts seemed unclear, a slightly weaker U.S. dollar from the previous session somewhat supported prices.

A weaker dollar typically makes it cheaper for oil purchases in other currencies which could bolster overall demand. "The USD may continue to face downside pressure as the Fed is expected to cut rates later this year, which potentially offers the bullish factor to oil prices," said independent market analyst Tina Teng. Rising geopolitical premiums as the Israel-Gaza conflict ongoing were also supportive of prices, though an immediate impact on supplies in the Middle East region remains to be seen.

A positive geopolitical risk premium, as there is no clear ceasefire breakthrough between Israel and Hamas, remains a key supportive price factor for oil at this juncture, said senior market analyst Kelvin Wong at OANDA.