By Crude oil prices continued to rally on Thursday as a drop in US stockpiles and softer inflation buoyed sentiments in the market.
Concerns over Russian supply disruptions due to recent US sanctions also fueled price increases.
The International Energy Agency said on Wednesday that the fresh sanctions pose risks to the supply of crude oil in the coming weeks.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $78.97 per barrel, up 0.3%. Brent crude oil on the Intercontinental Exchange was at $82.27 per barrel, also up 0.3% from the previous close.
Both benchmarks had hit their highest levels since August 2024 earlier in the session on Thursday.
US crude stocks fall
On Wednesday, the Energy Information Administration reported that crude oil stocks in the US fell by 2 million barrels during the week ending on January 10.
Stocks were at 412.7 million barrels in the country, which was 6% below the five-year average for the period.
Also, crude oil inventories fell for the seventh consecutive time last week, the longest declining streak since July 2021.
However, product stockpiles in the US rose last week. According to the data, gasoline inventories rose by 5.9 million barrels, while distillate stocks increased by 3.1 million barrels.
Production in the US remained largely steady in the week ended January 10 at 13.481 million barrels per day.
Analysts at ING Group said:
The decline over the last week was driven by crude oil imports falling 304k b/d WoW and exports rising by 1m b/d WoW (week-on-week).
Softer inflation and supply disruptions
Data on Wednesday showed that US consumer price index inflation in December rose by 0.4%, largely in line with expectations.
“Easing underlying inflation in the US renewed hopes of a less restrictive Fed policy this year. The core inflation unexpectedly slowed, while headline consumer prices showed no significant upside surprises,” Jigar Trivedi, senior analyst at Reliance Securities was quoted as saying in a report by Reuters.
Lower interest rates bode well for oil as it leaves more liquidity in the market.
Meanwhile, fresh sanctions on the Russian shadow fleet are taking its toll on shipping rates.
Tanker rates have surged over the past few days after the US sanctioned 183 vessels on Friday, which are mostly part of the Russian shadow fleet.
This has led to several countries such as India, China, and others, that import the bulk of Russian crude, to look for other sources.
Demand for Middle Eastern barrels has increased, resulting in traders booking more cargo and vessels to carry oil from these countries to Asia.
A major supply disruption from Iran is also likely if US President-elect Donald Trump imposes tougher sanctions on the country’s oil exports.
OPEC+ forecasts
The Organization of the Petroleum Exporting Countries on Wednesday kept its forecast for growth in oil demand in 2025 unchanged at 1.4 million barrels per day.
According to the cartel, demand growth is likely to be robust in 2026 as well at a further 1.4 million barrels per day.
The group also left its supply growth estimates unchanged for non-OPEC+ members at 1.11 million barrels per day for 2025, while for 2026, supply is expected to grow by a similar amount.
Oil prices have gained some momentum since the beginning of the year with supply disruptions in focus and demand rising due to colder weather in the US and Europe.
“The market appears to be consolidating after its bull run, rather than correcting. This being the case, it’s difficult to work out what might be next for crude,” David Morrison, senior market analyst at Trade Nation said.
The market looks as if it could finally be breaking out of a downtrend, which has been building ever since March 2022.
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