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Oil prices rose on Monday, hitting their highest levels in three weeks as investors focused on further U.S. sanctions on Russia, potential impacts on global oil supplies, and increased oil imports by China. The market was also buoyed by signals of tighter oil supply globally.
Brent Crude and WTI Surge:
- Brent crude futures rose by 89 cents, or 1.3%, to $71.25 a barrel by 1114 GMT.
- U.S. West Texas Intermediate (WTI) crude climbed 93 cents, or 1.4%, to $69.38.
The rise in prices reflects optimism around China’s increased oil imports and expectations around U.S. sanctions on Russia, which may further tighten the global supply. UBS analyst Giovanni Staunovo noted that despite increased inventories in China, there is still a perceived tightness in the market, with most of the inventory build occurring in China and on ships, rather than in key locations.
Russia’s Declining Oil Exports:
- Russia’s seaborne oil product exports in June decreased by 3.4% compared to May, reaching 8.98 million metric tons. This decline added to concerns about tightening oil supplies.
- U.S. President Donald Trump has announced plans to send Patriot air defense missiles to Ukraine and is expected to make a “major statement” on Russia, possibly expanding sanctions.
China’s Oil Imports Surge:
- China’s June oil imports increased by 7.4% year-on-year, reaching 12.14 million barrels per day. This is the highest level since August 2023, which is offering support to the oil market.
Geopolitical Tensions and Supply Concerns:
- A bipartisan U.S. bill, gaining momentum in Congress, could impose further sanctions on Russia. European Union envoys are also nearing an agreement on an 18th sanctions package, which is expected to include a lower oil price cap for Russian oil.
- In the context of these sanctions, there is growing concern about the supply impacts from Russia’s oil output, further propelling the rise in oil prices.
IEA Outlook:
- Last week, Brent crude gained 3%, while WTI saw a 2.2% weekly gain. The International Energy Agency (IEA) raised expectations of a tighter global oil market, supporting the upward momentum in oil prices.
Ongoing Tariff Talks:
- Investors are also watching U.S. tariff talks with major trading partners. The outcome of these talks could further influence oil demand and impact global economic growth, which will continue to influence oil prices.
The market remains highly sensitive to geopolitical developments, particularly in Russia, and China’s oil demand, with both factors having significant influence on global supply and prices in the coming weeks.
