Crude and Gas Prices Surge Amid Fresh Sanctions on Russia
February WTI Crude and RBOB Gasoline Close Higher
February WTI crude oil (CLG25) Monday closed up +2.25 (+2.94%), and February RBOB gasoline (RBG25) closed up +0.0254 (+1.22%).
On Monday, crude and gasoline prices experienced moderate gains, reaching a 5-month high for crude and a 3-month high for gasoline. Crude prices increased again following last Friday’s announcement of stricter U.S. sanctions on Russian oil, which may tighten global supplies. However, a rally in the dollar index (DXY00) to a 2-year high is generally unfavorable for energy prices.
Sanctions Prompt Concerns Over Global Oil Supplies
Crude prices rose for a second consecutive session due to the U.S. imposing new sanctions on Russia’s oil sector last Friday. The sanctions targeted Gazprom Neft and Surgutneftgas, responsible for exporting around 970,000 bpd of Russian crude in the first ten months of 2024. This figure accounts for about 30% of Russia’s tanker flow, based on Bloomberg data. Additionally, the U.S. has aimed sanctions at insurers and traders involved with hundreds of tanker cargoes.
Decreased Russian Exports Support Prices
A decrease in Russian crude oil exports is providing support for crude prices. Bloomberg’s weekly tracking data indicates that Russian crude exports dropped by -190,000 bpd to 2.88 million bpd in the week ending January 5.
Global Crude Supply Tightens
Crude oil stored on tankers worldwide also saw a decline, which tends to lift prices. Vortexa reported that crude oil held stationary on tankers for over seven days decreased by -4.8% week-over-week to 50.59 million barrels during the week ending January 10. The prospect of further sanctions on Iranian and Russian crude might further restrict global oil supplies, supporting higher prices. Mike Walz, President-elect Trump’s national security adviser, has committed to reinstating ‘maximum pressure’ on Iran.
Saudi Arabia’s Price Increase Indicates Supply View
Crude found additional support last month after Saudi Arabia raised its crude prices for Asian customers for February by 60 cents per barrel, exceeding expectations of a 10-cent increase. This suggests Saudi Arabia anticipates tighter supplies in its largest export market.
OPEC+ Adjusts Production Plans
OPEC+ supported crude prices by delaying a planned production hike of +180,000 bpd from January to April, as well as unwinding production cuts more slowly than initially outlined. The United Arab Emirates (UAE) announced its planned 300,000 bpd target increase would also be postponed until April. OPEC+ had previously agreed to gradually restore 2.2 million bpd of output from January through late 2025, but this timeline has now extended to September 2026. OPEC’s December crude production dropped by -120,000 bpd to 27.05 million bpd.
China’s Demand Weakens
On the other hand, China’s weakened demand for crude presents a bearish outlook. According to customs data, China’s crude imports in 2024 fell -1.9% year-over-year to 553 million metric tons, which is significant as China ranks as the world’s largest crude importer.
U.S. Inventories and Rig Counts Show Mixed Trends
The most recent EIA report highlighted that U.S. crude oil inventories as of January 3 were -5.8% below the seasonal 5-year average, while gasoline inventories were -1.4% below, and distillate inventories were -4.8% under the average. Additionally, U.S. crude oil production for the week ending January 3 fell -0.1% week-over-week to 13.563 million bpd, slightly below the record high of 13.631 million bpd noted in early December.
Baker Hughes reported last Friday that the number of active U.S. oil rigs fell by -2 to 480 rigs for the week ending January 10. This figure remains slightly above the recent low of 477 rigs recorded on November 29, yet it signifies a decline from the 4-and-a-half-year high of 627 rigs in December 2022.
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information presented is for informational purposes only. For more details, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.