Oil edges upward, but ambiguity over sanctions restrains momentum
15 Jan 2025
Oil prices rose on Wednesday, reversing a part of an earlier session’s decline. The reason – apprehensions over potential disruptions tied to sanctions on Russian oil tankers. Uncertainties surrounding the broader implications of these restrictions continue.
By 0735 GMT, Brent crude futures rose by 51 cents, or 0.6%, reaching $80.43 per barrel, following a 1.4% drop on Tuesday. Meanwhile, U.S. West Texas Intermediate (WTI) crude advanced 64 cents, or 0.8%, to $78.14 per barrel after experiencing a 1.6% fall in the preceding session.
The previous day’s decline stemmed from projections by the U.S. Energy Information Administration (EIA), which forecast that oil prices would face downward pressure over the next two years due to supply anticipated to be outpacing demand.
“The prevailing narrative continues to orbit around the sanctions on Russian oil,” remarked Yeap Jun Rong, a market strategist at IG. “Coupled with a series of robust U.S. economic indicators, the central question revolves around the extent to which Russian output will be curtailed globally and whether compensatory measures can effectively bridge the resultant gap.”
Yeap further noted that, in the immediate future, oil prices may relinquish some of the notable gains accrued in the past week.
Adding a layer of support to prices on Wednesday was data from the American Petroleum Institute (API), indicating a drawdown in U.S. crude inventories—the world’s largest consumer of oil.
“Crude prices are exhibiting resilience in early Asian trading today, buoyed by API figures suggesting a sharper-than-anticipated decline in U.S. oil stockpiles over the last week,” ING analysts stated.
Although inventories at Cushing, Oklahoma—the primary delivery hub for WTI futures contracts—rose by 600,000 barrels, ING analysts underscored that the levels remain historically low. According to sources referencing the API’s data, U.S. crude oil inventories diminished by 2.6 million barrels for the week ending January 10.
Meanwhile, gasoline (petrol) stocks increased by 5.4 million barrels, and distillate inventories surged by 4.88 million barrels.
Market sentiment reflected expectations from a Reuters [M1] survey, which has forecast a smaller reduction of around 1 million barrels in U.S. crude stockpiles during the same period.
On Tuesday, the EIA adjusted its long-term demand outlook, predicting global oil consumption in 2025 to average 104.1 million barrels per day, while supply is anticipated to slightly surpass this at 104.4 million barrels per day.
The agency also projected a decline in benchmark prices, with Brent crude expected to average $74 per barrel in 2025 before decreasing further to $66 in 2026. Similarly, WTI is forecasted to average $70 per barrel in 2025, dropping to $62 in the following year.
Frequently asked questions (FAQs) about the news
1. Why did oil prices rise on Wednesday?
Oil prices increased due to concerns about potential supply disruptions caused by sanctions on Russian oil tankers. Additionally, reports of declining U.S. crude oil stockpiles provided further support to prices.
2. What were the changes in Brent and WTI crude prices?
- Brent crude futures rose by 51 cents (0.6%) to $80.43 per barrel.
- WTI crude climbed 64 cents (0.8%) to $78.14 per barrel.
3. Why did oil prices decline on Tuesday?
Prices slipped after the U.S. Energy Information Administration (EIA) forecasted that global oil supply would exceed demand over the next two years, potentially pressuring prices.
4. How do the sanctions on Russian oil affect the global market?
Sanctions on Russian oil could reduce global supply. The extent of the impact depends on how much Russian oil is removed from the market and whether alternative sources can offset the shortfall.
5. What is the significance of U.S. crude oil stockpile data?
The American Petroleum Institute (API) reported a drawdown of 2.6 million barrels in U.S. crude stockpiles, which is larger than expected. This decline indicates tighter supply in the world’s largest oil consumer, lending support to oil prices.
6. What is the EIA’s outlook for oil demand and supply?
The EIA predicts global oil demand in 2025 will average 104.1 million barrels per day, with supply slightly higher at 104.4 million barrels per day.
7. How are oil prices expected to trend in the future?
The EIA expects Brent crude prices to decline to an average of $74 per barrel in 2025 and further to $66 in 2026. Similarly, WTI prices are forecasted to drop from $70 in 2025 to $62 in 2026.
8. What other factors are influencing oil prices?
Other factors include strong U.S. economic data, inventory levels at key storage hubs like Cushing, Oklahoma, and geopolitical developments related to global oil supply.
9. How do gasoline and distillate inventories impact the market?
While crude oil inventories declined, gasoline inventories rose by 5.4 million barrels and distillate stocks increased by 4.88 million barrels. This reflects a mixed supply-demand scenario for refined products.
10. What time will the official U.S. stockpile data be released?
The Energy Information Administration (EIA) will release its official data at 10:30 a.m. EST (1530 GMT).