Oil Holds Positive As Global Supply Risks Multiply
Oil held near a five-month high as threats to global supplies posed by tougher U.S. sanctions on Russian flows and potential trade tariffs from the incoming Trump administration threatened global supplies.
West Texas Intermediate was steady near $79 a barrel, after surging more than 6% over the previous two sessions, while Brent settled above $81. The U.S. imposed its most aggressive sanctions yet on Russia’s oil industry on Friday, targeting major exporters, insurers and more than 150 tankers. At the same time, 10 European countries are also pushing for tighter curbs.
In Canada, meanwhile, Alberta Premier Danielle Smith warned of possible U.S. tariffs after Donald Trump takes office next week, with no exemption for oil, after meeting with the president-elect in Florida. More than half of U.S. crude imports come from Canada, mostly from Alberta. Crude has had a strong start to the year, rising nearly 10% as multiplying supply risks provided a further boost to a market that has been buoyed by falling U.S. inventories and cold weather that has fueled demand. While the full impact of the latest U.S. sanctions package remains uncertain, it could prompt a diversion of global flows as users across Asia, including refiners in India and China, are forced to reach far and wide for replacement barrels.
Some early signs of disruption are already apparent. Among them, a senior Indian bureaucrat told reporters that sanctioned ships will not be allowed to unload, and tanker rates have jumped as the restrictions threaten to cut off ship supplies. In the physical market, Chinese buyers are snapping up immediate crude supplies from the United Arab Emirates and Oman in tenders.
Widely tracked metrics show a tightening market. WTI’s immediate spread — the difference between its two nearest contracts — has jumped to $1.55 a barrel in backwardation, a bullish pattern. That’s the widest spread since August, and compares with a spread of less than 50 cents late last year.
Source: Bloomberg
