Oil Prices Climb as Russian Sanction Raise Supply Risks

Oil Prices Climb as Russian Sanction Raise Supply Risks

Oil prices increased in the global commodity market due to supply risks following the U.S. latest sanctions on Russian oil production and supply flows. In the past two weeks, the outgoing U.S. president Joe Biden administration sanctioned more than 100 tankers and two Russian oil producers over the war in Ukraine.

Brent crude futures climbed 34 cents, or 0.4%, to $81.13 a barrel on Monday amidst expectation that China’s demand will pick up. U.S. West Texas Intermediate crude, which expires on Tuesday, was at $78.47 a barrel, up 59 cents.

The global commodities market will be focused on today’s inauguration of President Trump with close attention on the large amount of executive orders he is reportedly planning to sign

Despite the rally in crude oil prices running out of steam towards the end of last week, ICE Brent still managed to settle almost 1.3% higher on the week and remain above US$80/bbl, ING commodities strategists said in a note..

Analysts said there is a fair amount of uncertainty across markets coming into this week given the inauguration of President Trump and the raft of executive orders he reportedly is planning to sign.

This combined with it being a US holiday today, means that some market participants may have decided to take some risk off the table, according to ING note. .

The latest positioning data shows that speculators increased their net long in ICE Brent by 27,473 lots over the last reporting week to leave them with a net long of 254,332 lots as of last Tuesday.

The move was driven by fresh longs entering the market and left speculators with their largest net long since May. The strong buying reflects supply concerns following the announcement of US sanctions against the Russian energy industry.

In the US, there are also some short-term supply risks facing oil and gas production with freezing weather conditions in parts of Texas and New Mexico to persist over the next couple of days, which could lead to some production having to be shut in.

Significant production losses were seen in February 2021 as a result of freezing weather, while in January 2024, colder weather conditions also led to some supply losses. Output data from China on Friday shows that refineries increased the amount of crude oil they processed by 1.3% year on year in December.

However, for full-year 2024, refinery activity still fell by 3.6% YoY, reflecting weaker domestic demand. Output and trade numbers suggest that apparent oil demand in December came in at a little more than 13.9m b/d, down from 14m b/d the previous month, but up 0.6% year on year. Navy Intercepts Boat Laden with 100,000 litres of Stolen Crude Oil in Ondo