Oil Rises As Tight Supply Resulting From New Russian Sanctions Is Anticipated

Traders remain unfazed by separate bearish signals: File Image/

Earlier fears of tight global supply persisted on Wednesday, but this time due to the European Union agreeing to new sanctions against Russia for its war against Ukraine – and as a result, oil prices rose by over $1.

Brent settled up $1.33 to $73.52 per barrel, while West Texas Intermediate settled up $1.70 to $70.29.

The EU agreed to a 15th package of sanctions intended to target Russia's shadow fleet (which has helped it bypass the $60 per barrel price cap imposed by the G7) and Chinese firms making drones for Moscow; it also includes an extension of six months for the Czech Republic to import Russian oil-based products coming mainly through Slovakia.

John Kilduff, founding partner at Again Capital, said, "The renewed seriousness about clamping down on flows here is potentially supportive, and is offsetting the traditional demand metric that we have been focusing on."

Sentiment on Wednesday remained positive despite the Organization of the Petroleum Exporting Countries (OPEC) in its latest monthly report lowering its forecast for 2024 global oil demand growth by 210,000 barrels per day (bpd) from the November report to 1.6 million bpd, year-on-year.

The cartel also cut its oil demand growth forecast for 2025 by 90,000 bpd to 1.4 million bpd; this was the fifth straight month it lowered its demand growth projections.

Traders also seemed to shrug off the Energy Information Administration's disclosure that gasoline inventories in the U.S. rose by 5.1 million barrels for the week ended Dec. 6 and distillates climbed by 3.2 million barrels (however, crude inventories declined by 1.4 million barrels compared to expectations for a 600,000 drop).

In other oil news on Wednesday, Exxon Mobil Corp. said it will increase spending to up to $33 billion annually in order to increase oil and gas output by 18 percent, or 5.4 million bpd, by 2030.

Darren Woods, CEO of Exxon, said the additional spending is expected "to generate returns of more than 30 percent over the life of the investments"  and that the extra production will be from low-cost fields because they offer a "competitive advantage we think is unique in the industry."