Oil prices bounce around on Russian pipeline constraints, recession fears

© Reuters. FILE PHOTO: Sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Laila Kearney

NEW YORK (Reuters) -Oil prices see-sawed on Tuesday, as worries that a slowing economy could cut demand vied with news that some oil exports had been suspended on the Russia-to-Europe Druzhba pipeline that transits Ukraine.

Crude prices have been under pressure for weeks as fears mounted that a recession could cut oil demand.

Brent crude lost 77 cents, or 0.8%, to $95.88 a barrel at 1:01 p.m. EDT (1701 EDT). U.S. West Texas Intermediate (WTI) crude fell 88 cents, or 1%, to $89.88 a barrel. Earlier in the session, both benchmarks rose by more than $1 a barrel.

Russian pipeline monopoly Transneft said Ukraine had suspended oil flows via the pipeline because Western sanctions had prevented a payment from Moscow for transit fees from going through. That boosted prices earlier in the session.

Flows along the southern route of the Druzhba pipeline have been affected while the northern route serving Poland and Germany was uninterrupted.

"Not that we need it at this point, but it's another reminder of how tight the market is and how sensitive the price is to supply disruptions, particularly those from Russia," said Craig Erlam of brokerage OANDA.

Prices were pressured by talks of a last-ditch effort by European nations to revive the Iran nuclear accord. On Monday, the European Union put forward a "final" text to revive the 2015 Iran deal https://www.reuters.com/world/middle-east/irans-nuclear-negotiators-return-tehran-vienna-irna-2022-08-08. A senior EU official said a final decision on the proposal, which needs U.S. and Iranian approval, was expected within "very, very few weeks".

Talks have dragged on for months without a deal.

Iran's crude exports, according to tanker trackers, are at least 1 million barrels per day below their rate in 2018 when former U.S. President Donald Trump exited the nuclear agreement.

Oil is now down more than $40 from its peak following Russia's invasion of Ukraine, which took Brent briefly to $139 a barrel.

Coming into view is the latest round of weekly U.S. oil supply reports, firstly from the American Petroleum Institute at 2030 GMT. Analysts expect a small 400,000-barrel drop in crude inventories. [EIA/S]