Oil Extends Gains As New Russia Sanctions Target Rosneft, Lukoil

But unexpected U.S. stock draws won't offer much long-term support: analysts: File Image/Pixabay

New U.S. sanctions on Russia focusing on oil companies rekindled supply concerns on Wednesday, as did reassertions from the U.S. Energy Information Administration that stocks in that country fell last week.

As a result, Brent settled up $1.27 at $62.59 per barrel, and West Texas Intermediate settled up $1.26 at $58.50.

The latest sanctions targeted Russia's two biggest oil producers, Rosneft and Lukoil, and their subsidiaries; they were intended to bar foreign countries or companies from conducting business with the Russian companies and cut them off from much of the international financial system.

Meanwhile, the Energy Information Administration reported that commercial crude inventories fell by 0.96 million barrels in the week ending October 17, bringing total stocks down to 422.8 million barrels; gasoline and distillate inventories also dropped by 2.1 million and 1.5 million barrels, respectively.

Vishal Chaturvedi, a research analyst at FXStreet, wrote that the draws offered short-term support for oil prices and offset worries about oversupply.

But he added, “From a technical standpoint, the broader structure, however, still reflects a bearish bias, as prices remain below the cluster of short-term moving averages, with the 21-day SMA at $60.46, the 50-day at $62.03, and the 100-day at $64.22.”

Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, said of the stock draws, “It’s not a strong catalyst for further upside, as many traders still believe sizable builds are just around the corner.”

For its part, Bloomberg noted that “Oil still remains on track for a third monthly loss as signs of a global surplus put downward pressure on prices, though that’s provided an opportunity for the Trump administration to buy crude for strategic reserves.”

On the bullish side, earlier oil trading on Wednesday was robust in response to a report that the U.S. and India are nearing a trade deal; also, European Union leaders are expected to greenlight yet another sanctions package against Russia, the 19th in total, after Slovakia dropped objections.