Oil prices extended their gains on Tuesday, supported by signs that U.S. sanctions are significantly disrupting Russian crude exports. West Texas Intermediate (WTI) crude rose by 1.4%, closing above $73 a barrel. This marks a continuation of Monday’s 1.9% increase, which was the largest jump in nearly four weeks. Several million barrels of Russian crude in the Pacific are stranded after the shuttle tankers that transported them to China were blacklisted.
Russia’s Output Falls Below OPEC+ Quota
Russia’s crude production dropped further below the country’s OPEC+ quota last month, according to sources familiar with the data. In response to the sanctions, Chinese refiners are being offered Russian crude at larger discounts, while premiums for Middle Eastern oil have surged.
Analysts at Commerzbank, including Carsten Fritsch, noted that the effects of the tightened sanctions on Russia and Iran are likely being underestimated. They believe this, along with a sharp reduction in bullish oil market positions, presents an “upside potential” for oil prices in the coming weeks.
Oil Market Volatility Amid Global Concerns
Oil prices have had a volatile start to the year. Initially, prices rose due to higher heating demand from a cold Northern Hemisphere winter and U.S. measures against Russia’s oil industry. However, concerns over U.S. President Donald Trump’s expanding tariffs, which could harm major economies and reduce global oil demand, initially dampened these gains. This week, the market shifted focus back to the impact of sanctions, fueling the recent rally.
In addition to sanctions, Trump has suggested that Israel should cancel its ceasefire agreement with Hamas if hostages are not returned by this weekend, raising the risk of further escalation. Both parties have accused each other of violating ceasefire terms.
Long-Term Outlook Remains Weighed Down by Global Oil Surplus
Despite the recent rally, projections for a global oil surplus continue to weigh on the market’s long-term outlook. The U.S. Energy Information Administration (EIA) raised its forecast for oil surpluses in 2025 and 2026, citing continued growth in non-OPEC production and expectations that sanctions will have a limited impact on Russian output.
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