The price of oil stabilized after a three-day decline, with investors assessing the impact of Western sanctions imposed on major crude oil producers in Russia, in conjunction with differing industry estimates about changes in US inventories.
Brent crude oil traded above $64 a barrel after falling more than 2% over the previous three sessions, while West Texas Intermediate crude oil is approaching $60.
Matthew Whitaker, the US ambassador to NATO, said that US President Donald Trump will move forward with implementing tough new sanctions against Moscow, with the aim of pressuring Vladimir Putin to enter into negotiations to end the war in Ukraine.
Meanwhile, the US industry report showed a decline of 4 million barrels in total oil inventories nationwide, along with a decline in gasoline and distillate inventories. However, the report also indicated an increase in oil inventories at the main storage center in Cushing, Oklahoma. Official data is scheduled to be released later on Wednesday.
Oil is heading down for the third month in a row
Oil is heading towards recording its third monthly decline in a row, with prices declining due to expectations of a global surplus as the OPEC+ alliance increases production.
The coalition is scheduled to hold a meeting at the end of the week, where it is likely to agree to an additional increase in supply. Traders are also monitoring progress in concluding a trade agreement between the United States and China, with an expected meeting on Thursday between Trump and his Chinese counterpart, Xi Jinping.
Sanctions on Russia are surrounded by uncertainty
“Fundamentals in the oil market remain bearish, as the OPEC+ alliance continues to increase supply while the market surplus deepens,” said Warren Patterson, head of commodity strategy at ING Groep NV in Singapore.
He added: “It is clear that sanctions on Russia remain the main factor surrounding uncertainty, and we will need more time to gain clarity about their effects.”
Last week, the US Treasury Department blacklisted Rosneft PJSC and Lukoil PJSC, the largest oil producers in Russia, while traders are closely monitoring indicators of the impact of these sanctions.
American officials said that the administration’s plan aims to make Russian trade more expensive and risky without causing prices to rise. In Asia, India’s state refiners are considering whether they can continue to buy some discounted Russian cargoes through non-sanctioned suppliers.
Watch for US interest rates
Traders are also awaiting a US Federal Reserve meeting on Wednesday, which may determine investors’ overall appetite for high-risk assets, including commodities. Monetary policymakers are expected to cut interest rates by a quarter of a percentage point.
With regard to petroleum products, the spread between European diesel futures contracts and Brent crude contracts – known as crack – rose to its highest levels in more than 20 months this week, as a result of sanctions imposed on Russia and the disruption of some refineries, which threatens market supplies.
In the latest trading, Brent crude contracts for settlement in December fell by 0.2% to $64.28 a barrel at 11:38 am in Singapore. West Texas Intermediate crude for December delivery fell 0.1% to $60.07 a barrel.
