Oil prices climbed on Friday following the tightening of U.S. sanctions against Russian crude exports, intensifying supply worries in an already constrained market. Additionally, forecasts indicate a decline in global inventories throughout the fourth quarter.
Brent futures increased by 94 cents, or 1.1%, to reach $86.94 per barrel, while U.S. West Texas Intermediate (WTI) crude saw a gain of $1.07, or 1.3%, reaching $83.98 a barrel by 0630 GMT.
Despite some fluctuations earlier in the week, both Brent and WTI are poised for weekly gains of 2.8% and 1.4%, respectively. These gains followed a surge in both contracts earlier in the week, driven by concerns of potential disruptions to Middle Eastern exports after the weekend’s attack by Hamas on Israel, which raised the specter of a wider conflict.
Kelvin Wong, senior markets analyst at OANDA in Singapore, noted that a “geopolitical risk premium still lingers around the corner, likely to support oil prices in the short term.”
The primary source of concern in the market is supply constraints stemming from the Middle East and Russia, according to Wong.
The U.S. imposed the first sanctions on owners of tankers carrying Russian oil priced above the G7’s price cap of $60 a barrel, aiming to close loopholes in the mechanism designed to penalize Moscow for its invasion of Ukraine.
Russia, as the world’s second-largest oil producer and a major exporter, faces tighter U.S. scrutiny of its shipments, which could potentially curtail supply.
In addition, the Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for growth in global oil demand, pointing to signs of a resilient world economy in the current year and anticipated further demand increases in China, the world’s largest oil importer.
Daniel Hynes, senior commodity strategist at ANZ, noted that supply-side issues remained a focus in the crude oil market. He added that prices rose during early trading on Friday due to the stronger enforcement of U.S. sanctions.
Hynes also mentioned that sentiment improved after OPEC’s forecast of a 3 million barrel per day slump in crude stockpiles for the current quarter, assuming no further supply disruptions related to the Israel-Hamas conflict.
Oil prices were resilient to the release of data showing a month-on-month decline in Chinese crude imports. Although imports last month dropped 10.5% from the August level, they were still up by 14% compared to the same month the previous year, continuing the trend seen in 2023 of significantly exceeding 2022 levels when China’s economy was heavily impacted by pandemic-related restrictions.