Oil gains over 1% as Ukraine drone attacks target Russian supply

Oil prices rose over a dollar a barrel on Tuesday, as traders weighed the possibility that Russian supplies may be disrupted by Ukrainian drone attacks on its ports and refineries, and awaited the Federal Reserve's decision on U.S. interest rates.

Brent crude futures were up $1.01, or 1.5%, at $68.45 a barrel by 12:36 p.m. ET (1636 GMT). U.S. West Texas Intermediate crude futures were up $1.21, or 1.9%, to $64.51 a barrel.

Russia's oil pipeline monopoly Transneft  has warned producers they may have to cut output following Ukraine's drone attacks on critical export ports and refineries, three industry sources said.

Ukraine has intensified attacks on Russia's energy infrastructure in recent weeks, disrupting operations at Russia's key western oil terminal Primorsk last week as talks to end their conflict have stalled.

"An attack on an export terminal like Primorsk is aimed more at limiting Russia's ability to sell its oil abroad, affecting export markets," said JP Morgan analysts.

"More importantly, the attack suggests a growing willingness to disrupt international oil markets, which has the potential to add upside pressure on oil prices," they said.