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Crude oil futures rose Monday on growing geopolitical concerns following attacks in Russia and a bullish note from Goldman Sachs on the outlook for commodities.
Russia’s Kuibyshev oil refinery has stopped one of its two main refining units, putting it offline half its capacity following a drone attack in Ukraine over the weekend, Reuters reported; the strike was the eighth against Russian refineries in the last three weeks.
The attack will knock out another 35,000 bbl/day of Russian refinery capacity, taking a total of about 400,000 bbl/day offline on top of normal maintenance, StoneX’s energy team led by Alex Hodes said.
Furthermore, according to Reuters, the Russian government has ordered companies to reduce oil production in the second quarter to ensure a production target of 9 million barrels per day by the end of June, in line with commitments made to OPEC+ .
Russia’s Vladimir Putin attempted to link Ukraine to Friday’s terrorist attack at a concert hall outside Moscow that killed more than 130 people; Islamic State terrorists claimed responsibility for the attack.
Front-month Nymex crude (CL1:COM) for May delivery is out +1.6% at $81.95/bbl, and May Brent crude (CO1:COM) is finished +1.5% at $86.75 a barrel, the third highest recorded so far this year for both benchmarks.
The energy sector (NYSEARCA:XLE) easily posted the biggest gain among S&P 500 industry groups, +1.7%with Constellation Energy (CEG), APA Corp. (APA) and ConocoPhillips (COP) among the top 15 gainers of the day.
Analysts at Goldman Sachs said Monday they expect commodities to rise this year as central banks cut interest rates, helping to support industrial and consumer demand.
Commodities including copper, aluminum, gold and oil could yield 15% this year as financing costs fall, manufacturing recovers and geopolitical risks persist, said Goldman analysts including Samantha Dart and Daan Struyven , according to Bloomberg.
“We find that US rate cuts in non-recessionary environments lead to higher commodity prices, with the biggest boost for metals (copper and gold in particular), followed by crude oil,” the Goldman Group said, adding “ the positive impact on prices tends to increase over time, as the growth impulse resulting from more accommodating financial conditions filters through”.
Jeff Currie, former head of commodities research at Goldman and now at Carlyle Group, also recently predicted gains when the Fed cuts rates.