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Oil Prices See Uptick Amid Supply Concerns and Sanction Impacts

(Reuters) – Oil prices experienced a rise of nearly 2% on Wednesday, driven by a notable reduction in stockpiles and fears of supply interruptions stemming from newly imposed U.S. sanctions on Russia. Meanwhile, a temporary ceasefire in the Gaza conflict constrained further increases in pricing.

By midday EST (1705 GMT), Brent crude futures were up $1.55, marking a 1.94% increase to $81.47 a barrel. In contrast, U.S. West Texas Intermediate (WTI) crude climbed by $2.02, or 2.61%, reaching $79.52.

Recent data from the U.S. Energy Information Administration (EIA) indicates that U.S. crude oil inventories plummeted to their lowest figures since 2022, a result of higher export levels coupled with decreased imports. Concurrently, gasoline and distillate stocks saw unexpected increases over the week.

Bob Yawger, director of energy futures at Mizuho, stated, “The recent draw in crude oil stocks was largely influenced by the dynamics of imports and exports.” He expressed skepticism about the high levels of exports, noting that many were arranged before the recent sanctions were enacted.

The International Energy Agency (IEA) highlighted in its latest monthly report that the recently intensified U.S. sanctions on Russian oil could significantly disrupt its supply chains and distribution. This latest round of sanctions has led to increased market tension, supporting price stability. Ole Hansen, head of commodity strategy at Saxo Bank, remarked, “Tankers carrying Russian crude appear to be facing challenges in unloading their cargoes globally, potentially leading to short-term supply tightness.”

In a development that somewhat limited the price rally, Israel and Hamas reached an agreement to cease hostilities in Gaza and exchange Israeli hostages for Palestinian prisoners. This move has sparked hopes for a possible resolution to the 15-month-long conflict that has significantly impacted the region.

On the broader market front, OPEC has projected a rise in global oil demand by 1.43 million barrels per day by 2026, indicating a steady growth rate similar to that predicted for 2025. This outlook aligns with OPEC’s long-term belief that oil demand will continue to increase over the next twenty years. In contrast, the IEA anticipates that global demand will peak within this decade, primarily due to the global shift towards cleaner energy sources.

As the economic landscape evolves, U.S. consumer prices showed minor increases in December, surpassing expectations and intensifying speculation regarding potential interest rate cuts by the Federal Reserve. Such rate reductions can foster economic growth, which in turn may elevate oil demand.

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