Oil prices rose on Tuesday for the second day in a row amid growing concerns about tight European supplies after Russia, a major supplier of oil and natural gas to the region, cut gas supplies through a major pipeline.
Brent crude futures for September rose 1.51 dollars, or 1.4 percent, to 106.66 dollars a barrel by 03.39 GMT, after jumping 1.9 percent the previous day.
US West, Texas Intermediate crude contracts for September also increased $1.36, or 1.4 percent, to $98.04 a barrel, after rising 2.1 percent on Monday.
Russia reduced gas supplies to Europe yesterday after Gazprom said that supplies through the Nord Stream 1 pipeline to Germany would be reduced to only 20 percent of its capacity.
Russia’s supply cuts will make countries unable to achieve their goals of refilling natural gas reserves before the winter demand period.
Germany, Europe’s largest economy, faces the prospect of gas rationing for the industry to keep its citizens warm during the winter months.
This may prompt end users to exchange gas for petroleum products, especially diesel. But this also carries risks because Russia supplies the region with most of the diesel, and prices are expected to rise for drivers who rely on the fuel.
“High gas prices, caused by Russian supply cuts, may increase the shift from gas to oil and support crude prices,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Supplies of crude oil, oil products and gas to Europe have been disrupted by Western sanctions and disputes with Russia’s overpayment since its February 24 invasion of Ukraine, which Moscow describes as a “special military operation”.
However, lower demand due to recent high crude oil and fuel prices and the expectation of higher interest rates in the US has put pressure on prices.
