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Oil prices extended their gains for a second consecutive session on Thursday, bolstered by concerns over potential supply disruptions due to expanded U.S. sanctions on Russia, a sharper-than-expected drop in U.S. crude inventories, and signs of improving global demand.
Price Movements
- Brent Crude: Increased by 23 cents (0.3%) to $82.26 per barrel by 0731 GMT, following a 2.6% surge in the previous session, marking its highest level since July 26, 2024.
- West Texas Intermediate (WTI): Rose 28 cents (0.4%) to $80.32 per barrel, after climbing 3.3% on Wednesday, reaching its highest price since July 19, 2024.
Key Drivers
- U.S. Crude Stock Draw: The Energy Information Administration reported a 2-million-barrel decline in U.S. crude oil inventories last week, significantly exceeding analysts’ expectations of a 992,000-barrel drop. This drawdown was attributed to increased exports and reduced imports, leaving stockpiles at their lowest levels since April 2022.
- Expanded U.S. Sanctions on Russia: New measures by the Biden administration have targeted Russian oil producers and shipping activities, tightening global supply and increasing shipping costs.
- Cautious OPEC+ Stance: Despite the price rally, OPEC+ appears unlikely to increase production in the near term, maintaining its output cuts established over the past two years.
Global Demand Outlook
- Oil demand grew by 1.2 million barrels per day (bpd) in the first two weeks of 2025 compared to the same period last year.
- Analysts expect demand to rise further, driven by increased travel activity in India during festive celebrations and Lunar New Year travel in China. JPMorgan forecasts a year-on-year demand growth of 1.4 million bpd in the coming weeks.
Economic and Geopolitical Factors
- Interest Rate Speculation: Expectations of potential interest rate cuts by the U.S. Federal Reserve, amid signs of easing core inflation, could boost economic activity and energy consumption.
- Middle East Developments: The agreement between Israel and Hamas to halt fighting and exchange hostages for prisoners provided some relief to geopolitical tensions, slightly limiting oil price gains.
The interplay between supply-side constraints and robust demand forecasts continues to shape the market outlook, with analysts closely monitoring further developments in U.S. monetary policy and global geopolitics.
