Oil prices extend gains amid tightening supply and demand optimism
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Oil prices advanced for a second consecutive session on Thursday, driven by concerns over supply disruptions, a significant drop in U.S. crude oil inventories, and an improving outlook for global demand.
Market overview: Brent and WTI close to multi-month highs
Brent crude futures rose 0.3% to $82.26 per barrel by 0731 GMT, reaching levels not seen since late July. Similarly, U.S. West Texas Intermediate (WTI) crude futures climbed 0.4% to $80.32 a barrel, extending gains from the previous session, where prices had jumped 3.3%.
U.S. inventory decline highlights supply constraints
The Energy Information Administration (EIA) reported that U.S. crude oil stocks fell by 2 million barrels last week, marking their lowest level since April 2022. This drawdown was well above the 992,000-barrel decline analysts had anticipated, reflecting rising exports and declining imports.
The tighter inventory levels add to supply concerns already heightened by the U.S. imposing broader sanctions on Russian oil producers and shipping activities. These measures have disrupted Moscow’s oil exports, forcing major buyers to seek alternative suppliers and driving up global shipping costs.
OPEC+ maintains cautious stance
Despite the recent rally in oil prices, OPEC and its allies (OPEC+) are expected to maintain a cautious approach to output adjustments. Rory Johnston, founder of Commodity Context, suggested that the group would likely delay easing production cuts due to repeated setbacks in demand recovery over the past year.
Geopolitical and demand factors
The recent ceasefire agreement between Israel and Hamas has slightly tempered oil’s upward momentum by easing geopolitical tensions. However, on the demand side, global oil consumption increased by 1.2 million barrels per day (bpd) in the first two weeks of 2025 compared to the same period last year, according to JPMorgan analysts.
The analysts project further demand growth of 1.4 million bpd in the coming weeks, fueled by heightened travel activity in India during major festival gatherings and Lunar New Year celebrations in China later this month.
Economic implications and market sentiment
The possibility of U.S. Federal Reserve interest rate cuts by year-end, spurred by recent data indicating easing core inflation, adds another layer of optimism. Lower rates could boost economic activity and energy consumption, lending further support to oil prices.
As supply concerns persist and demand drivers strengthen, oil markets remain poised for continued volatility, with traders closely monitoring geopolitical developments and macroeconomic indicators.
Market overview: Brent and WTI close to multi-month highs
Brent crude futures rose 0.3% to $82.26 per barrel by 0731 GMT, reaching levels not seen since late July. Similarly, U.S. West Texas Intermediate (WTI) crude futures climbed 0.4% to $80.32 a barrel, extending gains from the previous session, where prices had jumped 3.3%.
U.S. inventory decline highlights supply constraints
The Energy Information Administration (EIA) reported that U.S. crude oil stocks fell by 2 million barrels last week, marking their lowest level since April 2022. This drawdown was well above the 992,000-barrel decline analysts had anticipated, reflecting rising exports and declining imports.
The tighter inventory levels add to supply concerns already heightened by the U.S. imposing broader sanctions on Russian oil producers and shipping activities. These measures have disrupted Moscow’s oil exports, forcing major buyers to seek alternative suppliers and driving up global shipping costs.
OPEC+ maintains cautious stance
Despite the recent rally in oil prices, OPEC and its allies (OPEC+) are expected to maintain a cautious approach to output adjustments. Rory Johnston, founder of Commodity Context, suggested that the group would likely delay easing production cuts due to repeated setbacks in demand recovery over the past year.
Geopolitical and demand factors
The recent ceasefire agreement between Israel and Hamas has slightly tempered oil’s upward momentum by easing geopolitical tensions. However, on the demand side, global oil consumption increased by 1.2 million barrels per day (bpd) in the first two weeks of 2025 compared to the same period last year, according to JPMorgan analysts.
The analysts project further demand growth of 1.4 million bpd in the coming weeks, fueled by heightened travel activity in India during major festival gatherings and Lunar New Year celebrations in China later this month.
Economic implications and market sentiment
The possibility of U.S. Federal Reserve interest rate cuts by year-end, spurred by recent data indicating easing core inflation, adds another layer of optimism. Lower rates could boost economic activity and energy consumption, lending further support to oil prices.
As supply concerns persist and demand drivers strengthen, oil markets remain poised for continued volatility, with traders closely monitoring geopolitical developments and macroeconomic indicators.