Crude oil climbs on Russian supply risks; Russia and China agree on huge new gas pipeline

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Crude oil futures powered higher Tuesday as the U.S. returned from the long holiday weekend to reports of new Ukraine strikes on Russian oil infrastructure and the Trump administration imposed new sanctions targeting Iran's oil revenue stream.

Ukrainian drone attacks have shut down [https://www.reuters.com/business/energy/russian-energy-facilities-targeted-drone-attacks-2025-09-01/] facilities accounting for at least 17% of Russia's oil processing capacity, or 1.1M bbl/day, according to Reuters calculations.

"August saw the most severe wave of Ukrainian drone strikes on Russian energy infrastructure since mid-2022, with up to 10 refineries hit," Kpler analyst Sumit Ritolia said in a note. "While repairs are underway, past patterns suggest lasting impacts into October."

The Trump administration has indirectly pressured Russia's oil consumers, implementing additional levies on imports of Indian goods because of the country's continued purchases of Russian crude, but it has not yet moved against China, Russia's biggest oil buyer.

China's President Xi, Russia's President Putin, and India's Prime Minister Modi met at the Shanghai Cooperation Organization summit, challenging the U.S. in pressing for a new global security and economic order, which analysts said could force President Trump to react and prompt more secondary sanctions, especially against India.

Russia also signed a binding deal to build a pipeline from Russia to China through Mongolia: The Power of Siberia 2 pipeline would be able to transport as much as 50B cm/year of gas, after the first Power of Siberia pipeline to China transports 38B cm/year and could be increased to 44B cm/year.

Also supporting crude prices, the U.S. Treasury Department sanctioned a network of shipping companies and vessels led by an Iraqi-Kittitian businessman for smuggling Iranian oil disguised as Iraqi oil.

Oil's move higher comes as key members of OPEC+ are set to meet Sunday to discuss production policy, with the cartel widely expected to leave production targets unchanged after unwinding 2.2M bbl/day of production cuts between April and September.

Some analysts say OPEC+ might wait for more data after the conclusion of the U.S. summer driving season before it makes its next move, given an expected supply surplus in this year's Q4.

Front-month Nymex crude (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]) for October delivery ended +2.5% to $65.59/bbl, and the front-month Brent contract (CO1:COM [https://seekingalpha.com/symbol/CO1:COM]) for November delivery finished +1.4% to $69.14/bbl, the highest settlement values for the benchmark crudes since August 4 and August 1, respectively.

U.S. natural gas futures (NG1:COM [https://seekingalpha.com/symbol/NG1:COM]) settled near the $3 level that has proven a point of resistance in recent sessions, with the front-month Nymex October contract closing +0.4% at $3.009/MMBtu, its fifth consecutive daily gain.

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