Introduction
On Tuesday, oil prices increased by over a dollar due to the recent US sanctions against Russian oil and optimism surrounding an end to the longest US government shutdown in history. However, concerns over excess supply limited gains.
Oil Price Movements
Brent crude futures rose 1.10 dollars, or 1.72%, to 65.16 dollars per barrel. US West Texas Intermediate (WTI) crude gained 0.91 dollars, or 1.51%, to reach 61.04 dollars per barrel.
Mexico’s export crude mix was valued at 58.04 dollars per barrel, an increase of 0.84 dollars or 1.47%.
Impact of US Sanctions on Russia
Investors are assessing the consequences of US sanctions on Russia and their effects on both the crude oil and refined products markets.
On Monday, Lukoil declared force majeure at an oilfield in Iraq it operates, as reported by Reuters sources. This marks the largest impact so far from sanctions imposed last month.
The restriction on fuel exports due to the sanctions is supporting prices amidst crude oversupply, according to Tamas Varga, an analyst at PVM.
“The new US sanctions imposed on major Russian oil producers and exporters are affecting product exports. Consequently, heating diesel and refined gasoline move differently from crude oil,” Varga explained.
Middle Eastern Producers Adjusting to Increased Indian Demand
Producers from the Middle East, including Saudi Arabia, Iraq, and Kuwait, will boost crude supply to India in December as Indian refineries seek alternatives to Russian oil due to the sanctions, according to sources from four Indian refineries.
Government Shutdown Optimism
Market support also came from the possibility of ending the longest US government shutdown in history this week, following the Senate’s approval of a deal to restore federal funding.
Key Questions and Answers
- What caused the recent rise in oil prices? The increase was primarily due to US sanctions on Russian oil and optimism about the end of the longest US government shutdown.
- Which oil benchmarks experienced growth? Brent crude futures rose 1.72% to 65.16 dollars per barrel, while US WTI crude gained 1.51% to reach 61.04 dollars per barrel.
- How are US sanctions affecting Russian oil exports? The sanctions have led to restrictions on fuel exports, which in turn supports prices amidst crude oversupply.
- What changes are Middle Eastern producers making to meet Indian demand? Saudi Arabia, Iraq, and Kuwait will increase crude supply to India in December as Indian refineries search for alternatives to Russian oil.
- What factors contributed to market optimism? The potential end to the longest US government shutdown in history provided market support.
