Oil Prices Surge Amid Tightening Supply and US Sanctions; OPEC+ Cuts and Winter Demand Drive Volatility
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Oil prices rose for the fourth consecutive week due to tightening global supply, US sanctions on Russian oil, and increased demand from extreme winter conditions. OPEC+ production cuts and declining US crude inventories further supported the upward trend. However, declining demand from China and increased non-OPEC production continue to counterbalance these factors, resulting in expected price volatility.
Key Points:
- Oil Prices: Brent reached $81.73 per barrel; WTI hit $79.30.
- US Sanctions: New measures target Russian oil producers and vessels.
- OPEC+ Cuts: Low production extended until 2026 to stabilize the market.
- Demand Drivers: Cold weather and rising heating fuel usage.
- China's Impact: Declining demand growth continues to pressure global markets.
- Market Outlook: Anticipated price volatility influenced by sanctions, OPEC+, and geopolitical policies.
Oil Prices Climb Amid Russian Sanctions
Oil prices rose on Saturday, heading toward a fourth consecutive weekly gain as the latest US sanctions on Russian energy trade tightened supply, driving up spot prices and shipping rates.
- Brent crude futures climbed 44 cents (0.5%) to $81.73 per barrel as of 7:43 a.m. Saudi time.
- US West Texas Intermediate (WTI) crude futures rose 62 cents (0.8%) to $79.30 per barrel.
- Weekly gains stood at 2.5% for Brent and 3.6% for WTI.
Rising Prices Backed by OPEC+ Cuts, Winter Demand
- Strong Start to 2025: Brent oil prices reached a four-month high in January, gaining over 9% due to tighter US sanctions on Russian oil, OPEC+ production curbs, and increased heating demand driven by extreme winter conditions in Western countries.
- US Sanctions on Russia: Recent measures targeting Russian oil producers, insurers, and oil-carrying vessels have reduced global oil supplies, which were already tightened by OPEC+ cuts.
- OPEC+ Policies: The group extended low production policies into 2025, delaying output increases until April and postponing the full unwinding of cuts to the end of 2026 to counter weak demand and increased non-OPEC production.
- Weather Impact: Cold weather across the US and Europe has increased winter fuel demand and may disrupt supplies, further fueling price volatility.
News: US Sanctions and Declining Stockpiles Boost Oil Market
- US Stockpile Decline: The latest API data showed US crude oil inventories fell by more than 6.6 million barrels in early January, supporting higher prices.
- Speculation on Iran: Potential US sanctions on Iran could halt oil flows, heightening concerns about supply shortages.
- China’s Demand Trends: Declining oil demand in China—caused by an economic slowdown, the rise of electric vehicles, and an expanded rail network—continues to weigh on global markets.
- Non-OPEC Output: Increased production from non-OPEC countries such as the US, Canada, and Brazil has helped balance the global market and limit price hikes.
Expert Opinion: Volatility Expected as Supply Concerns and Geopolitical Factors Persist
The current fundamentals indicate price volatility will persist in the coming months. US sanctions on Russian oil and OPEC+ production cuts are expected to tighten global supply. Additionally, factors such as China’s economic trajectory, the performance of the US dollar, and policies from the Trump administration will influence oil price trends.
Daily Market Report
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