Oil prices rose by only 1% after Ukraine declared Russian ports a war zone

After the damage to two Russian ships, Ukraine declared the Russian ports of the Black Sea: Anapa, Novorossiysk, Gelendzhik, Tuapse, Sochi and Taman as a zone of military threat, but this has not yet led to an increase in world oil prices.

On August 4, the Ministry of Infrastructure of Ukraine issued a coastal alert, valid until canceled, based on order No. 5 of the Navy of Ukraine dated August 4. Earlier, the Ministry of Defense of Ukraine, in response to a similar statement of the Russian Federation, warned that from July 21, all ships heading to the Black Sea ports of the Russian Federation will be considered military targets.

On the night of August 4, near the Novorossiysk base, the Russian amphibious assault ship "Olenegorsky Gornyak" was seriously damaged by a naval drone, and the following night, in the area of the Kerch bridge, a Russian SIG chemical tanker carrying fuel for the military was damaged by a drone. Later, SBU head V. Malyuk confirmed that these attacks were Ukrainian special operations.

Oil prices, which have been rising for a month, have barely reacted to ship bombings and warnings of possible attacks at the port of Novorossiysk, the main shipping port for Russian oil.

October Brent crude futures on the ICE exchange rose 1.1% to a 3-month high of $86.2 a barrel on Friday, adding 10.5% for the month.

On Thursday, Saudi Arabia and the Russian Federation said they would continue to cut crude oil production by 1 million and 0.3 million barrels per day until September to support prices. In July, OPEC countries reduced oil production by 900,000 barrels/day to an almost two-year low of 27.79 million barrels/day.

Russian crude oil supplies fell to a 7-month low of 2.98 million bpd in 4 weeks, while Saudi Arabia cut production to 9 million bpd, the lowest level in several years.

Declining demand for crude oil in India, the world's third-largest oil importer, is putting pressure on prices. In June, India reduced crude oil imports by 1.3% (compared to June 2022) to a 7-month low of 19.7 million tons.

Many experts believe that Ukraine's attacks on the port infrastructure of the Russian Federation in response to the shelling of grain port terminals will lead to an increase in oil and grain prices. The United States is not interested in this, which is trying to curb the global rise in oil prices and reduce inflation in the country in order to avoid a recession in the world economy caused by the pandemic and then the war in Ukraine.

However, stopping the export of oil and grain from the Russian Federation will quickly collapse its economy, which will force the Russian authorities to stop the war in order to reduce the internal discontent of the population, while the West is currently restricting Ukraine from striking the Russian Federation with Western weapons in order to avoid further escalation.