Oil Rises on Lower Stockpiles
Oil rose after dropping the most in more than a month, as the impact of U.S. sanctions on Russian flows continued to reverberate, and an industry report showed lower U.S. stockpiles.
Brent rose above $80 a barrel after losing 1.4% on Tuesday on expectations for a cease-fire between Israel and Hamas. West Texas Intermediate neared $78. 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 official data.
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 taking 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 boosted heating demand, and a steady decline in U.S. inventories. The early advances defy widespread expectations that prices will struggle in 2025 as inventories are expected to outpace demand, fueling a global surplus.
The outlook for market balance will be in focus on Wednesday when 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 suggested oversupply in 2025 and 2026, although its forecasts were made before the latest Russian sanctions.
Beyond the noise caused by the U.S. sanctions, traders are weighing the implications of President-elect Donald Trump’s second term in the White House. These include the possibility of tighter restrictions on Iranian exports, potential trade tariffs that could target Canadian oil, and steps to boost domestic production.
Prices are likely to remain in a narrow range for now as traders seek “more clarity on Trump’s energy policy on U.S. oil output ahead of his upcoming inauguration,” said Yeap Jun Rong, market strategist for IG Asia Pte.
Source: Bloomberg
