Oil Rises on Sanctions Worries, Lower Stockpiles
Oil edged higher after dropping the most in more than a month as the impact of U.S. sanctions on Russian flows continued to reverberate, and industry reports pointed to lower U.S. stockpiles.
West Texas Intermediate rose near $78 a barrel, after dropping 1.7% on Tuesday on expectations of a cease-fire between Israel and Hamas, while Brent ended below $80. The American Petroleum Institute said crude inventories fell 2.6 million barrels last week, according to a document seen by Bloomberg. That would be the eighth draw if confirmed by government data late Wednesday.
The impact of the latest U.S. sanctions is rippling through the market. Buyers of Russian oil are increasingly turning to other OPEC+ suppliers, as countries including India say they will ban sanctioned tankers. In China, state oil companies and big private refiners have been buying cargoes from the Middle East and elsewhere in preparation for disruptions. Shipping costs have jumped, while U.S. physical pricing patterns have also shifted.
Crude has had a strong start to the year, with the latest U.S. sanctions adding to gains driven by a colder Northern Hemisphere winter that has boosted heating demand, and a steady decline in U.S. inventories. The early gains defy widespread expectations that prices will struggle in 2025 as inventories are expected to outpace demand, fueling a global surplus.
In addition to the noise caused by U.S. sanctions, traders are weighing the implications of President-elect Donald Trump’s second term in the White House, including the threat of tariffs that could ensnare Canadian oil. Ahead of his Jan. 20 inauguration, Canadian crude’s heavy discount to WTI has widened.
The outlook for market balance will be in focus on Wednesday as the Organization of the Petroleum Exporting Countries and the International Energy Agency release their monthly outlooks. On Tuesday, the U.S. Energy Information Administration’s latest report hinted at a wider oversupply projection in 2025.
Source: Bloomberg
