- Crude oil futures gain as traders weighed sanctions on Russian oil export.
- Declining inventories lend partial support to the oil prices.
- OPEC+ output increase could cap the gains in oil prices.
Crude oil futures stayed volatile this week as traders weighed US sanctions on Russia’s oil producers against a potential OPEC+ output increase and signs of solid global demand. According to Bloomberg, Russia’s seaborne oil exports slipped from a 30-month top in the week ending 26th October, reducing 70k barrels a day to 3.72 mpd.
However, the fall was attributed to weather conditions, mainly in the Baltic Sea. Still, the broader scenario for Russian oil remains uncertain as the US aims to sanction Rosneft and Lukoil, accounting for 2% global output.
Russia’s largest oil buyers, India and China, have started reassessing their buying strategies. Indian refiners are scaling back purchases from Russian-sanctioned companies and pivoting to Middle Eastern and Latin American suppliers. The shift could tighten supply in Asia, pushing freight rates higher.
Meanwhile, the US crude oil inventories dipped sharply, lending short-term support. The API figures showed a drawdown of 4.02 million barrels for the week ending 24th October. Analysts note that the larger-than-expected draw reflects robust domestic demand, offsetting bearish pressure from global uncertainty.
However, the sentiment remains fragile as the OPEC+ considers increasing the output in December, potentially adding 137k mpd. According to Priyanka Sachdeva, an analyst at Phillip Nova, “The market is struggling to balance competing narratives of supply risk and potential oversupply.”
Market participants are closely watching diplomatic and policy developments. Germany’s economic minister confirmed that Rosneft’s German operations are expected to be affected by the US sanctions, reflecting Washington’s flexibility in enforcing the sanctions.
Market participants are also closely monitoring diplomatic and policy developments. The Kremlin maintained that Russia continues to offer “top-quality energy at a good price,” leaving it to partners to decide on purchases post-sanctions. Meanwhile, Germany’s economy minister confirmed that Rosneft’s German operations would be exempt from U.S. measures, reflecting Washington’s flexible enforcement stance.
The geopolitical backdrop adds a layer of complexity. Traders are looking forward to the meeting between President Trump and Xi Jinping in South Korea later this week. Markets anticipate that the de-escalating trade tension will potentially support demand expectations ahead of winter.
Crude oil prices remain in a narrow range this week despite the interplay of sanctions, shifting trade routes, and production policy. The markets now focus on the OPEC+ meeting and US inventory trends.
