- The crude oil futures remain steady, balancing supply risks with geopolitical considerations.
- The market is attempting to rebalance energy investment portfolios, which could impact the global energy landscape.
- The broader market sentiment remains cautious amid OPEC+ output cuts and sanctions from the UK, US, and EU on Russian oil giants.
On Thursday, oil futures traded range-bound, following a week of uncertainty marked by rising inventory levels, softer demand, and lingering geopolitical tensions. Brent crude traded near $63.70, witnessing a 0.3% rise, while WTI traded around $59.80 after a 1.5% decline in its previous session.
The latest data from the US Energy Information Administration (EIA) revealed a sharp increase in crude stockpiles of up to 5.2 million barrels, exceeding forecasts of a slight drawdown. MUFG analysts described this upbeat figure as the largest since July, indicating a supply overhang that weighs on sentiment.
The sharp rise stemmed from stronger crude imports. Meanwhile, gasoline stocks dropped by 4.73 million barrels, their lowest level since November 2022. Despite sluggish growth, the data suggest a resilient demand for refined fuels.
On the other hand, Saudi Arabia reduced its official selling prices for all Asian grades for December loading. This signals that Arab Light crude is expected to drop to $1 per barrel from $1.20, its lowest level since January.
This move, combined with OPEC+’s announcement of increased production by 137,000 barrels per day, raised concerns in the markets about the potential for easing in Asian demand growth. According to ANZ Research, the markets are expecting an oversupply as OPEC+ output increases while consumption forecasts soften amid a decline in manufacturing activity in China and Europe.
Meanwhile, the US, UK, and EU sanctions against Rosneft and Lukoil, the two major Russian oil companies, could tighten supplies in the medium term. Ukrainian sanctions envoy Vladsylav Vlasyuk stated that such measures could cost Moscow up to $5.5 billion in oil revenue per month. They also noted that some Chinese refiners are already hesitant about signing new contracts with Moscow.
If the Russian exports witness a meaningful decline, the prices could find temporary support. However, the current market behavior indicates that traders are favoring demand risks over supply shocks.
Additionally, global investment banks are hinting at a gradual shift away from fossil fuels. HSBC’s chief sustainability officer, Julian Wentzel, emphasized this week that oil and gas deals are expected to make up a small share of the bank’s energy portfolio.
Meanwhile, the expanding renewable energy sector attempts to meet AI-driven power demand. This long-term transition indicates the market’s readjustment in energy investment portfolios, which is expected to influence capital flows and future supply growth across the oil sector.