Oil prices rise amid Russian sanctions and US stockpile data

Crude oil prices gain traction as markets assess Russian supply disruptions and US inventory trends.

An oil and gas worker walks during operations at a drilling rig in the Zhetybay field, Mangystau region, Kazakhstan, on November 13, 2023. Photo by Turar Kazangapov/Reuters

By Alana Salsabila and Clarisa Sendy

Oil prices rose on Wednesday, recovering from losses seen in the previous trading session, as the market refocused on the potential supply disruptions caused by sanctions on Russian tankers. Despite the upward movement, gains were moderated as traders awaited more clarity on the impact of these sanctions and other market dynamics.

Brent crude futures rose by 51 cents, or 0.6%, reaching $80.43 per barrel as of 0735 GMT, following a 1.4% drop the previous day. Similarly, U.S. West Texas Intermediate (WTI) crude increased by 64 cents, or 0.8%, to $78.14 per barrel after experiencing a 1.6% decline on Tuesday.

Tuesday’s downturn in oil prices was driven by the U.S. Energy Information Administration’s (EIA) prediction that global oil supply would surpass demand over the next two years, placing downward pressure on prices. Market strategist Yeap Jun Rong from IG highlighted that Russian oil sanctions and robust U.S. economic data remain central to market movements.

The market is closely watching how much Russian oil supply could be removed from the global market due to sanctions and whether other measures will be sufficient to offset the potential shortfall. Yeap noted that in the near term, crude oil might surrender some of the sharp gains recorded in recent weeks.

Adding to the market’s complexity, the American Petroleum Institute (API) reported a drop in U.S. crude stockpiles, offering some support to oil prices. According to the API, U.S. crude inventories fell by 2.6 million barrels for the week ending January 10, exceeding market expectations. Gasoline and distillate stocks, however, rose by 5.4 million barrels and 4.88 million barrels, respectively.

Analysts at ING highlighted that while crude oil inventories at the Cushing, Oklahoma, storage hub increased by 600,000 barrels, overall stock levels remain historically low. Cushing serves as the delivery point for WTI futures contracts, making its inventory data a critical factor for traders.

The broader market is also anticipating the official inventory data from the EIA, expected later on Wednesday. A Reuters poll suggested a smaller decline in U.S. crude stockpiles, with analysts predicting a drop of approximately 1 million barrels for the week ending January 10.

Beyond immediate inventory data, the EIA adjusted its long-term outlook for oil markets. The agency now forecasts global oil demand in 2025 to average 104.1 million barrels per day (bpd), while supply is projected to reach 104.4 million bpd. These projections hint at a delicate balance between supply and demand, with potential implications for price stability.

Brent prices are expected to decline by 8% to an average of $74 per barrel in 2025, with further decreases to $66 per barrel anticipated in 2026. Similarly, WTI prices are projected to average $70 per barrel in 2025 before falling to $62 in 2026.

The ongoing sanctions on Russian oil remain a significant variable. Russia’s role as a major energy supplier means any reduction in its oil exports could tighten global supply, creating volatility in prices. At the same time, stronger-than-expected U.S. economic data continues to influence demand forecasts, offering a counterbalance to concerns over Russian supply constraints.

Market participants are also watching geopolitical developments, including trade relations and OPEC+ policies, which could impact global supply dynamics. The interplay of these factors will determine whether oil prices can sustain their recent gains or face renewed pressure in the months ahead.

While immediate attention remains on sanctions and stockpile data, the broader outlook for crude oil prices is shaped by long-term shifts in supply-demand dynamics, economic trends, and energy policy decisions. This evolving landscape underscores the complexities of the global oil market, with both opportunities and challenges for producers and consumers alike.

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