Oil hovers at 4-month high as Russia sanctions remain in focus

By Arunima Kumar

(Reuters) – Oil prices paused their rally on Tuesday but remained at a four-month high, with the market focused on the impact of new U.S. sanctions on Russian oil exports to key buyers India and China.

Brent crude was down 54 cents, or 0.67 percent, at $80.47 a barrel by 1033 GMT, while U.S. West Texas Intermediate (WTI) crude was down 53 cents, or 0.67 percent, at $78.29 a barrel.

Prices rose 2 percent on Monday after the US Treasury Department imposed sanctions on Gazprom Neft and Sergutneftegas on Friday, as well as 183 oil tankers.

“There may be further developments in store for several countries looking for alternative fuel supplies to adapt to the embargo, even if prices ease slightly and tomorrow’s US CPI data is warmer than expected,” Charalampos Pissouros said. Senior Investment Analyst at Broker XM.

The US Producer Price Index (PPI) will be released today, followed by the Consumer Price Index (CPI) on Wednesday.

Core inflation rose above the 0.2% forecast, reducing the likelihood of further rate cuts by the Federal Reserve, which normally supports economic growth and boosts oil demand. (MKTS/Globe)

While analysts were still expecting a significant price impact on Russian oil supplies from the new sanctions, their impact on the physical market may be less than the affected volumes suggest.

Analysts at ING estimated the new sanctions as having the potential to completely wipe out the 700,000 barrels per day surplus predicted for this year, but said the real impact was likely to be lower.

“Actual reductions in flows are likely to be smaller as Russia and buyers find ways around these sanctions,” they said in their note.

However, analysts expect the supply glut in the market to be minimal as a result.

“We expect the latest sanctions to bring the market closer to balance this year and less pressure on demand growth,” said Ashley Kelty, an analyst at Panmure Libram.

Uncertainty over demand from China’s major buyer could cloud the impact of strong supply. China’s crude oil output fell in 2024 for the first time outside of the Covid-19 outbreak, official data showed.

(Reporting by Colleen Howe, Trixie Yap and Arunima Kumar; Editing by Kim Coghill, Kirsten Donovan and Tomasz Janowski)