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Prices of oil rise after Ukrainian attacks on Russian oil infrastructure and stalled peace negotiations

The oil price rose on Thursday, after Ukrainian attacks on Russia’s oil infrastructure indicated potential supply restrictions. Stalled peace talks dampened expectations of a deal to restore Russian oil flow to global markets. However, weak fundamentals limited gains.

Brent crude rose by 24 cents or 0.38% to $62.91 at 0349 GMT. U.S. West Texas Intermediate gained 29 cents or 0.49% to $59.24.

A Ukrainian military intelligence source confirmed that Ukraine had attacked the Druzhba pipeline in Russia's Tambov central region on Wednesday. This was the fifth attack against the pipeline, which sends Russian crude oil to Hungary or Slovakia. Later, the operator of the pipeline and Hungary's Oil and Gas company confirmed that supplies were flowing through it as usual.

In a report, the consultancy Kpler stated that Ukraine's drone campaign has moved into a more strategic and sustained phase. It added that attacks now target refineries repeatedly, in an effort to prevent key assets from stabilizing.

The report said that "this has caused Russian refining output to fall by around 5 million barrels a day between September-November, a 335,000 barrels bpd decline year-on-year, with gasoline being the hardest hit and gasoil production also materially lower."

Prices were also supported by the perception that the peace plan for Ukraine is stalling, especially after the representatives of U.S. president Donald Trump returned from their peace talks with the Kremlin without any specific breakthroughs in ending the conflict. Trump said that it is unclear what will happen next.

Vandana Insights, a provider of oil market analyses, said that "Crude is likely to remain in a narrow band while the Ukraine peace effort grinds on."

Prices had been pushed down by traders' expectations that the war would end, and that sanctions against Russia would be lifted, allowing Russian oil to return to a market already oversupplied.

Fitch Ratings cut its oil price estimates for 2025-2027 on Thursday to reflect the market oversupply. Production growth is also expected to exceed demand. Reporting by Mohi N. Narayan, New Delhi; Colleen H. Howe, Beijing; and Michael Perry.

(source: Reuters)