By Oil prices hit a near three-month high on Wednesday as concerns about supply disruptions and optimism over rising demand supported the market.
“Concerns over Iranian and Russian oil flows will also be providing some support,” Warren Patterson, head of commodities strategy at ING Group, said.
Meanwhile, according to a Reuters survey, oil production by the Organization of the Petroleum Exporting Countries and allies fell in December. This aided sentiments in the market as well.
Additionally, positive economic data from the US also raised hopes of more domestic demand for fuel and oil.
At the time of writing, the price of West Texas Intermediate crude oil was at $75.16 per barrel, up 1.2% from the previous close.
Brent crude oil on the Intercontinental Exchange was at $77.78 per barrel, up nearly 1%.
Possible oil supply disruptions
Recent reports have suggested that the Western powers are likely to tighten sanctions against tankers carrying Russian oil.
Also, stricter sanctions against Iran would disrupt oil flows from the country.
Oil prices have been climbing since the start of the year on the back of concerns related to disruptions in supply from these two countries.
There were reports yesterday that a port operator in Shandong, China, has told ports not to accept tankers sanctioned by the US.
Patterson said:
Refiners in the region are large buyers of Iranian crude oil and so if these ports follow through, it potentially provides more obstacles to Iranian oil flows.
Iran currently produces about 3.3 million barrels per day of crude oil and exports most of it to China.
US President-elect Donald Trump is likely to pursue stricter compliance with sanctions against Iran, which the incumbent President Joe Biden avoided.
During Biden’s years of presidency, Iran’s oil production and exports climbed steadily compared with the volumes at the end of Trump’s first presidency in 2020.
OPEC+ output falls
According to reports, oil output in OPEC+ countries fell in December. Surveys from both Reuters and Bloomberg showed that output was down last month.
According to Bloomberg’s survey, oil output from the OPEC+ countries fell by 120,000 barrels per day in December.
The fall was mostly attributed to the United Arab Emirates.
According to the Reuters survey, production fell in the UAE due to field maintenance.
Russia produced less oil in December below its production targets, Bloomberg said.
However, the overproduction of the nine OPEC countries bound by the production targets still totalled more than 400,000 barrels per day in December.
US oil inventories fall
Patterson added:
Strength in the market continued in early morning trading today after API (American Petroleum Institute) numbers showed that US crude oil inventories fell by 4m barrels over the last week, while Cushing stocks declined by 3.1m barrels.
However, the data showed that gasoline and distillate stocks fell sharply last week.
According to API’s data, gasoline stocks in the US fell by 7.3 million barrels, while distillate inventories fell by 3.2 million barrels.
Investors will now wait for the release of the official weekly inventory report by the Energy Information Administration later on Wednesday.
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