Middle East Crude Markets Tighten Amid Sanctions and OPEC+ Delays

Key Highlights:

• Stable Prices: Brent and WTI crude oil prices showed minor gains of 0.16%, reflecting market caution ahead of Federal Reserve announcements.
• Supply Adjustments: U.S. crude inventories fell by 4.7 million barrels, while gasoline stocks rose by 2.9 million barrels due to reduced seasonal travel.
• Middle Eastern Market Tightness: UAE and OPEC+ production adjustments, coupled with sanctions on Russian and Iranian oil, tightened supply and raised prices for key grades.
• Geopolitical Impact: The EU and UK imposed sanctions on oil shipments, further restricting Russian crude flows, and impacting global supply dynamics.

Petroleum Prices: Oil Prices Hold Steady Amid Fed Rate Speculations

Oil prices traded within a narrow range early on Wednesday as investors stayed cautious ahead of the anticipated interest rate cut by the U.S. Federal Reserve.

• Brent futures increased by 12 cents, or 0.16%, to $73.31 per barrel by 0134 GMT.
• U.S. West Texas Intermediate crude rose by 11 cents, or 0.16%, to $70.19 per barrel.
• MCX crude oil prices opened at 5842, marking a 0.40% increase.

Petroleum Demand and Supply: Tight Supply Boosts Prices

• According to the American Petroleum Institute (API), U.S. crude oil inventories declined by 4.7 million barrels for the week ending December 13. However, gasoline inventories increased by 2.9 million barrels during the same period.
• API’s data showed that crude oil supplies in the U.S. are tightening, while demand for gasoline is falling. This decrease in gasoline demand is attributed to lower travel during the winter season.
• The U.S. Energy Information Administration (EIA) is expected to release its official data later today.
• Market participants are also awaiting the outcome of the U.S. Federal Reserve meeting later today, with a 25 basis point interest rate cut expected and projections for 2025 also under review.
• In geopolitical developments, the European Union adopted a 15th package of sanctions against Russia due to the ongoing war in Ukraine. This package added 33 vessels transporting Russian crude and petroleum products to the sanction list.
• Britain has also sanctioned 20 ships involved in transporting Russian oil. Russia remains one of the largest crude oil producers globally.

Petroleum News: Sanctions Reshape Global Crude Supply

• Crude markets in the Middle East are tightening, with the United Arab Emirates (UAE) curbing sales and sanctions disrupting Iranian oil flows. Prices for several key Middle Eastern grades have risen, according to traders dealing with the typically higher-sulfur (sour) oil from the region.
• Cargoes of Qatar’s Al-Shaheen crude for February loading were priced about $1 a barrel above the regional benchmark, compared with a premium of up to 70 cents for January.
• Prices for Oman crude and the UAE’s Murban grade have also risen relative to the Dubai benchmark over the past month, based on data from the General Index.
• These higher prices reflect the increased scarcity of Arab Gulf barrels for Asian buyers and come as the UAE plans to curtail sales early next year, while OPEC+ pushes for stronger discipline in meeting production targets. Growing sanctions by the U.S. and Europe on Iranian oil flows are further restricting supplies.

Expert Opinion: OPEC+ and UAE Adjust Production Plans

• Crude prices found support earlier this month after OPEC+ delayed a planned production hike of +180,000 bpd from January to April. Additionally, OPEC+ stated it would unwind its crude output cuts at a slower pace than originally planned.
• The UAE also announced it will delay a 300,000 bpd increase in crude production targets from January to April. OPEC+ had previously agreed to restore 2.2 million bpd of output through monthly installments from January to late 2025, but this timeline has now been extended until September 2026.