Oil Prices Extend Rally on Supply Risks and Inventory Draw

Oil prices held above seven-week highs in Asian trading on Friday, set for a weekly gain of more than 4%, as concerns over Russian supply disruptions and a surprise drawdown in U.S. crude inventories tightened the market balance.

Market Performance
By 21:08 ET (01:08 GMT), Brent crude futures for November delivery rose 0.3% to $69.63 a barrel, while West Texas Intermediate (WTI) futures gained 0.4% to $65.25. Both benchmarks remained at their strongest levels since early August, extending this week’s rally.

Russian Supply Concerns Deepen
Moscow announced partial curbs on diesel exports and extended a gasoline export ban until the end of 2025 to safeguard domestic fuel supplies. At the same time, Ukrainian drone strikes targeted refineries and petrochemical plants in Bryansk, Samara, and Bashkortostan, disrupting throughput and amplifying risks to Russian exports.

The geopolitical backdrop grew more complicated as Washington and its allies weighed additional sanctions on Moscow, raising expectations that Russian crude and product flows may shrink further.

U.S. Inventory Draw Supports Prices
Figures from the American Petroleum Institute estimated a 3.8 million barrel decline in U.S. crude inventories in the week to September 19. The Energy Information Administration confirmed a smaller but still notable draw, alongside a 1.1 million barrel fall in gasoline stocks and a 1.7 million barrel decline in distillates. These indicators underscored tighter short-term balances, providing additional price support.

Headwinds: Trump Tariffs and Fed Policy Outlook
Upside momentum was capped by fresh tariffs announced by U.S. President Donald Trump, including 100% duties on branded pharmaceuticals, 50% tariffs on kitchen cabinets, and 25% tariffs on heavy-duty trucks. Analysts warned that higher costs in the transport sector could dent diesel demand.

Meanwhile, stronger-than-expected U.S. GDP data raised questions over the Federal Reserve’s next policy steps. While last week’s 25 basis-point rate cut supported commodities, a more cautious Fed stance could limit future fuel demand growth.