Oil prices hover near four-month highs amid Russia sanctions impact
Shafaq News/ Oil prices eased onTuesday but remained near four-month highs as the impact of fresh U.S.sanctions on Russian oil remained the market's key focus.
Brent futures slipped 28 cents, or0.4%, to $80.73 a barrel by 0400 GMT, while U.S. West Texas Intermediate (WTI)crude fell 18 cents, or 0.2% to $78.64 a barrel.
Prices jumped 2% on Monday after theU.S. Treasury Department on Friday imposed sanctions on Gazprom Neft andSurgutneftegas as well as 183 vessels that trade oil as part of Russia'sso-called "shadow fleet" of tankers.
"Headlines surrounding Russiaoil sanctions have been the dominant driver for oil prices over the past week,and combined with resilient U.S. economic data, the tighter supply-demanddynamics have been seeing some momentum," said IG market strategist YeapJun Rong.
"Prices are taking a slightbreather today. With prices rising fast and furious by close to 10% since thestart of the year, it does prompt some profit-taking as event risks aroundupcoming U.S. inflation data releases loom."
The U.S. producer price index (PPI)will be released later in the day, with consumer price index (CPI) data onWednesday.
The stakes are high for Wednesday'sfigures, where any rise in core inflation greater than the forecast 0.2% wouldthreaten to close the door on further Federal Reserve interest rate cuts thisyear.
Lower interest rates typically helpin stimulating economic growth, which could prop up oil demand.
"The recent rally to athree-month high does signal an improvement in sentiment, but while broadbearish pressures have eased for the time being, a stronger catalyst is stillneeded to fuel a sustained broader uptrend," IG's Yeap added.
While analysts were still expectinga significant price impact on Russian oil supplies from the fresh sanctions,the actual physical impact could be less.
"...These sanctions have thepotential to take as much as 700k b/d of supply off the market, which woulderase the surplus that we are expecting for this year. However, the actualreduction in flows will likely be less, as Russia and buyers find ways aroundthese sanctions – clearly there will be more strain on non-sanctioned vesselswithin the shadow fleet," ING analysts said in a note.
Meanwhile, demand uncertainty frommajor buyer China could blunt the impact of the tighter supply. China's crudeoil imports fell in 2024 for the first time in two decades outside of theCOVID-19 pandemic, official data showed on Monday.
"New sanctions on Russiantankers are expected to impact crude supply to China and India, though keyplayers in these countries are still assessing the legal situation and possibleworkarounds," said Sparta Commodities' Philip Jones-Lux.
(REUTERS)
