Oil prices edged higher on Wednesday as markets refocused on potential supply disruptions stemming from sanctions on Russian oil tankers. However, gains were tempered by uncertainty over the extent of the impact and predictions of a longer-term surplus in global oil supply.
Brent crude futures climbed by 51 cents (0.6%) to $80.43 per barrel by 07:35 GMT, after a 1.4% drop in the previous session. U.S. West Texas Intermediate (WTI) crude followed suit, rising 64 cents (0.8%) to $78.14 a barrel, recovering from a 1.6% decline on Tuesday.
Key Market Drivers
- Russian Oil Sanctions: Market attention remains on the potential loss of Russian supply due to sanctions. However, the extent of the supply disruption and the effectiveness of alternative measures to fill any gaps remain unclear.
- “The key question remains on how much Russian supply will be lost and whether alternative measures can offset the shortfall,” said Yeap Jun Rong, a market strategist at IG.
- U.S. Crude Stockpiles: Prices found support from a larger-than-expected drop in U.S. crude inventories reported by the American Petroleum Institute (API) late Tuesday.
- API data indicated U.S. crude stocks fell by 2.6 million barrels in the week ending Jan. 10, surpassing the 1 million barrel drop analysts had anticipated.
- Gasoline inventories rose by 5.4 million barrels, and distillate stocks climbed by 4.88 million barrels.
- Cushing Storage Levels: Despite a 600,000-barrel increase in crude stocks at the Cushing, Oklahoma storage hub, inventory levels remain historically low, according to ING analysts.
Longer-Term Outlook
Tuesday’s report from the U.S. Energy Information Administration (EIA) added to the market’s caution by projecting global oil supply would outpace demand over the next two years.
- Demand and Supply Predictions:
- The EIA trimmed its 2025 global demand outlook to 104.1 million barrels per day (bpd) while projecting supply at 104.4 million bpd.
- Brent prices are expected to average $74 per barrel in 2025 before falling to $66 in 2026. WTI prices are forecasted to average $70 in 2025, dropping to $62 the following year.
Short-Term Sentiment
While recent U.S. economic data and crude stockpile trends offer some support, the market remains cautious.
- “The dominant driver has been all about the Russian oil sanctions lately, compounded by a streak of stronger U.S. economic data,” Yeap noted, adding that near-term oil prices may retrace some of their sharp gains from the past week.
Market Anticipation
Further clarity on U.S. crude stockpiles will emerge when the Energy Information Administration releases official data at 10:30 a.m. EST (15:30 GMT).
