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New U.S. Sanctions on Russian Oil Industry Significantly Alter Oil Market Outlook

ENERGYNew U.S. Sanctions on Russian Oil Industry Significantly Alter Oil Market Outlook

Recent sanctions imposed by the United States on the Russian oil industry have drastically changed the oil market outlook, which had previously indicated an excess supply and stable, low crude prices. Currently, the situation is starkly different — Brent crude has reached its highest levels in over four months, and analysts are increasingly discussing the possibility of further price increases. The U.S. sanctions, targeting Russian producers, insurers, and oil tankers, could significantly reduce the global supply. New regulations increase the risk of a drop in Russian crude exports, potentially causing market tensions. Citigroup estimates that about 30% of the Russian tanker fleet used to circumvent international sanctions could be excluded from the market, potentially reducing exports by 800,000 barrels per day.

Forecasts for oil prices are becoming increasingly optimistic. Goldman Sachs predicts that Brent crude could reach $90 per barrel if Russian production falls by one million barrels per day and Iranian supplies are also limited by possible tightening of sanctions by the Trump administration. Similarly, Morgan Stanley raised its Brent forecasts for the first quarter of 2025 to $77.50 per barrel, pointing to the increasing risk associated with supply constraints. Meanwhile, the market situation is further complicated by a decline in U.S. crude inventories, which have been noticeably reducing for seven consecutive weeks. In the key hub in Cushing, inventory levels have reached their lowest since 2014. This situation favors the phenomenon of backwardation, where the prices of oil in short-term contracts are higher than in long-term ones, indicating a tight market and limited access to crude in the short term.

Expected reports from the U.S. administration, the International Energy Agency (IEA), and OPEC may provide further clues about the market situation. OPEC plans to ease its own production restrictions starting April 2025, which may alleviate some tensions. However, with diminishing oil flows from Russia and potential escalation of sanctions against Iran, the global supply may continue to be under pressure. Experts suggest that Russia, trying to compensate for losses, may offer oil at attractive discounts in Asian markets, partially offsetting the impact of sanctions. Nevertheless, the prospect of limited supply and sustained high demand continues to exert significant upward pressure on crude prices.

The year 2025 is shaping up to be a period of great uncertainty in the oil market. Geopolitical decisions and responses from key oil organizations will be crucial. High market volatility may persist in the coming months, and oil prices, depending on further developments, could reach as high as $90 per barrel. All this indicates that the global energy market is entering a new phase of tensions and challenges.

Author: Krzysztof KamiƄski – Oanda TMS Brokers

Source: https://managerplus.pl/sankcje-ograniczaja-globalna-podaz-ropy-czy-czeka-nas-rekordowy-wzrost-cen-49642

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