Russia Shrugs Off Sanctions, Analysts Fret Anyway, Oil Rises

Meanwhile, Hamas agrees to peace in Gaza: File Image/Pixabay

Worries that Moscow's failure to reach a peace deal with Ukraine would keep sanctions against Russia in place for longer than expected were said to responsible for a reversal of a by-now familiar bearish oil trading pattern, with two key benchmarks logging modest gains on Wednesday.

Brent settled up 80 cents at $66.25 per barrel and West Texas Intermediate settled up 82 cents at $62.55, the highest closes since September 30 and 29, respectively.

The focus on Russia was kindled by a top Russian diplomat telling media the impetus to reach a peace deal – which would likely allow more Russian oil onto the global market - was largely exhausted.

Still, Russian ingenuity and determination seem to have continued to minimize the impact of the sanctions: Alexander Novak, deputy prime minster of Russia, stated that, "Production is growing... Just as we are unable to decrease it quickly, we are increasing it steadily…..We will fulfil our quota."

Novak was referring to the fact that Russia's oil production averaged 9.173 million barrels per day (bpd) in August, compared to the 9.259 million bpd ceiling under the deal forged by the Organization of the Petroleum Exporting Countries (OPEC).

Another influence on Wednesday's trading was the U.S. Energy Information Administration disclosing a 763,000 barrel weekly drop at the Cushing hub in Oklahoma, as well as a decline in oil product stocks, with U.S. distillate stocks experiencing the largest decline since late June.

However, Wednesday's gains were capped by the outlook for ample global supplies (a surplus of about 2 million barrels from this quarter through next year, according to Goldman Sachs), and this caused Keshav Lohiya, founder of Oilytics, to remark, "The disconnect continues between paper pricing and the predicted glut in global balances; we are back to an oil trading world where flat price is firmly in the $65 to $70 world."

Meanwhile, sure to influence trading in the upcoming session was late-breaking news that Hamas had accepted a U.S.-brokered peace deal to end two years of war in Gaza, which will result in the return of Israeli hostages and an intended rebuilding of the war-torn region.

Israel and Hamas have both signed off on the first phase of the plan.