Drone Strike on Caspian Pipeline Cuts Kazakhstan Oil Flow by 30%

Oil prices rose on February 18 after a drone strike on a Russian oil pipeline pumping station disrupted crude flows from Kazakhstan. The attack hit key infrastructure for Kazakh oil exports, potentially reducing transit volumes by 30% and requiring up to two months for repairs, according to Reuters.

The affected pipeline, operated by the Caspian Pipeline Consortium (CPC) and used by Western firms, including Chevron and Exxon Mobil, remains a key transit route for Kazakh crude.

Brent crude futures  rose 44 cents, or 0.6%, to $75.66 per barrel by 1014 GMT. U.S. West Texas Intermediate crude (WTI)  futures climbed 91 cents from Friday’s close to $71.65 a barrel. WTI did not settle on Monday due to the U.S. Presidents’ Day holiday.

The CPC said its Kropotkinskaya pumping station in Russia’s Krasnodar region was hit by drones, forcing a temporary halt in operations to assess damage. It described the strike as an act of terrorism but did not specify the origin of the drones.

A Ukrainian security official, speaking on condition of anonymity, said Kyiv was behind the attack, which also targeted the nearby Ilsky oil refinery. The official said at least 20 explosions were recorded in the vicinity of the refinery, which was reportedly supplying fuel to Russian military operations.

The CPC pipeline is the main export route for Kazakh crude, which accounts for about 1% of global oil supply. Its shareholders include Chevron, Exxon Mobil, Shell, Italy’s Eni, and the Russian state.

Market analysts noted that supply expectations have been a key driver of oil prices in recent weeks. “The overriding theme driving oil prices lately has been around supply expectations. With the weakness in prices over past weeks, news of a drone strike on Kazakhstan’s export pipeline in Russia has provided the catalyst for some bearish sentiment to unwind,” said Yeap Jun Rong, market strategist at IG Group Holdings.

Despite the short-term gains, analysts indicated that oil prices may remain under pressure. “However, longer-term gains are likely to remain capped as the market may anticipate higher supplies from OPEC+ and Russia further down the road while improvement in the demand outlook, particularly from China, remains uncertain,” Yeap added.

Business Monitor International analysts forecast that Brent crude prices will average $76 per barrel in 2025, a 5% decline from the 2024 average, citing oversupply, trade tensions, and tariffs.

A Russian state media report said OPEC+ producers are not considering delaying scheduled oil supply increases set to begin in April. In December, OPEC postponed a planned output hike to April, citing weak demand and increasing supply outside the group.

Markets are also monitoring developments from peace negotiations, with U.S. Secretary of State Marco Rubio set to meet Russian Foreign Minister Sergei Lavrov in Saudi Arabia on February 18 for talks on ending the war against Ukraine.

“There is seemingly plenty to be bearish about in the crude market, the biggest factor now being the outcome of Ukraine negotiations,” said Neil Crosby, an analyst at Sparta Commodities . “Russian oil may partially come back to the legitimate market, though there are, of course, many permutations to the end result.”

Earlier, strike drones targeted the Il’sk Oil Refinery in Russia’s Krasnodar Krai on February 17.