Oil edges higher as questions over sanctions caps further upside
January 15, 2025270 views0 comments
Onome Amuge
Oil traded higher on Wednesday morning, recovering from losses suffered the previous day, as traders turned their attention to potential disruptions in oil supply due to recently imposed sanctions on Russian tankers.
Despite these concerns, gains were constrained as the market remained cautious while awaiting further clarity on the scope and impact of the sanctions on global oil supplies.
Brent crude futures adding 51 cents, or 0.6 percent, to settle at $80.43 a barrel, paring back losses of 1.4 percent from the previous session. Similarly, the U.S. West Texas Intermediate (WTI) crude climbed 64 cents, or 0.8 percent, to $78.14 a barrel, recovering from Tuesday’s decline of 1.6 percent.
Prices slipped on Tuesday after the U.S. Energy Information Administration predicted oil would come under pressure over the next two years as supply would outpace demand.
Market strategist Yeap Jun Rong from IG commented on the drivers of oil prices, remarking that the dominant factor influencing the market lately has been the sanctions imposed on Russian oil and the spate of stronger economic data from the U.S.
Yeap also pointed out that the key issue for the oil market remains the extent of Russian oil supply losses and the feasibility of alternative sources to offset the shortfall, adding that oil prices may cede some of their recent gains in the short-term.
Market sentiment on Wednesday also received some tailwind from a decline in U.S. crude inventories, as reported by the American Petroleum Institute (API) on Tuesday.
Adding to the bearish sentiment on Tuesday, the U.S. Energy Information Administration (EIA) revised its global demand outlook for 2025 downwards to 104.1 million barrels per day, indicating a potential oversupply scenario.
As a result, the EIA projected Brent prices to drop 8 percent, settling at an average of $74 per barrel in 2025, before declining further to $66 per barrel in 2026. Similarly, WTI prices are forecasted to average $70 per barrel in 2025 and then decline to $62 per barrel in 2026.