Oil Prices Steady Near Four-Month Highs Amid Sanctions and Inflation Concerns
The global oil market remains on high alert as fresh U.S. sanctions on Russian oil continue to dominate the headlines. Despite a slight ease in prices on Tuesday, Brent futures and U.S. West Texas Intermediate (WTI) crude remain near four-month highs, driven by the uncertainty surrounding Russia’s oil exports.
Sanctions Take Center Stage
The U.S. Treasury Department’s decision to impose sanctions on Gazprom Neft and Surgutneftegas, as well as 183 vessels involved in Russia’s “shadow fleet” of tankers, has sent shockwaves through the market. The move has sparked concerns about the potential disruption to global oil supplies, with prices surging 2% on Monday.
Economic Data Takes Center Stage
As the market awaits the release of key U.S. inflation data, including the producer price index (PPI) and consumer price index (CPI), investors are bracing for potential volatility. A higher-than-expected core inflation reading could dash hopes of further Federal Reserve interest rate cuts, which would have a ripple effect on oil demand.
Supply and Demand Dynamics
While analysts expect the sanctions to have a significant impact on Russian oil supplies, the physical effects may be less severe. ING analysts estimate that up to 700,000 barrels per day could be taken off the market, erasing the expected surplus for this year. However, Russia and buyers are likely to find ways to circumvent the sanctions, reducing the actual impact on supply.
Demand Uncertainty Looms
Meanwhile, demand uncertainty from major buyer China could blunt the impact of the tighter supply. China’s crude oil imports fell in 2024 for the first time in two decades outside of the COVID-19 pandemic, according to official data. The new sanctions on Russian tankers are expected to impact crude supply to China and India, although key players are still assessing the legal situation and possible workarounds.
Market Sentiment
Despite the recent rally, market strategists remain cautious. “The recent rally to a three-month high does signal an improvement in sentiment, but while broad bearish pressures have eased for the time being, a stronger catalyst is still needed to fuel a sustained broader uptrend,” said IG market strategist Yeap Jun Rong. As the market navigates the complex web of sanctions, inflation concerns, and demand uncertainty, one thing is clear: oil prices will remain volatile in the coming weeks.
Leave a Reply