OPEC+: OPEC+ is concerned that a potential rise in U.S. oil output under a returning Donald Trump administration could further erode its market share and hinder efforts to maintain oil prices. The group, which controls about half of the world's oil supply, recently delayed a plan to increase output and extended some supply cuts until 2026, citing weak demand and growing production from non-OPEC+ producers like the U.S. OPEC has historically underestimated the growth of U.S. oil production, which has made the U.S. the world's top producer, now pumping a fifth of global supply. Some delegates believe that Trump’s return could lead to deregulation in the energy sector, which might boost U.S. oil production but is seen as unfavorable for OPEC+. A rise in U.S. output could complicate OPEC+'s efforts to gradually increase its production from April 2025 without causing a price drop, which would hurt member economies.
API: U.S. crude stocks fell by 4.69 million barrels in the week ending December 13, according to data from the American Petroleum Institute. Gasoline inventories increased by 2.45 million barrels, and distillate stocks rose by 744,000 barrels. Analysts had projected a 1.6 million barrel draw from crude storage, a distillate build of 660,000 barrels, and a gasoline build of 2 million barrels during the same period, based on a Reuters poll. The U.S. Energy Information Administration is set to release its official oil storage data on Wednesday.
Russian Oil: Britain sanctioned 20 ships for allegedly transporting illicit Russian oil, as part of efforts to target Russia’s shadow fleet in response to the 2022 invasion of Ukraine. The UK also imposed sanctions on 2Rivers DMCC and 2Rivers PTE LTD for allegedly facilitating Russian oil trade. 2Rivers expressed disappointment, stating that the sanctions do not reflect its current operations following a full exit from Russian trading activities. The company plans to challenge the sanctions through legal and diplomatic channels and is in talks with regulatory bodies, including the U.S. and EU authorities. Although several banks have paused new deals with 2Rivers, none have severed ties with the company, which continues to work with about 15 banks in Europe and the Middle East. 2Rivers, formerly Coral Energy, suspended Russian trading in 2023 after being a major buyer of Russian oil in 2021 and 2022. The UK government stated that the sanctions are meant to increase pressure on President Putin’s war economy, while the Russian embassy criticized them, claiming they would escalate global energy market volatility and raise energy prices for Britons.
Market Overview: Oil prices remained steady on Wednesday as investors remained cautious ahead of a potential interest rate cut by the U.S. Federal Reserve and its 2025 projections, while a draw in U.S. crude inventories provided some support. U.S. West Texas Intermediate crude rose by 47 cents, or 0.67%, to $70.55 per barrel. The Fed is expected to cut rates by a quarter point but signal a cautious approach to monetary policy in 2025, with investors focusing on hints regarding a possible January pause and future rate cuts. Lower interest rates typically reduce borrowing costs, which can stimulate economic growth and increase oil demand. Meanwhile, the American Petroleum Institute reported a 4.69 million barrel draw in U.S. crude stocks for the week ending December 13, further supporting oil prices.
Crude oil prices have fallen by about 14% this half, driven by expectations of an oversupply next year and a bleak outlook for China, which has outweighed concerns over geopolitical tensions in Ukraine and the Middle East. Recently, prices have remained in a narrow range, causing oil's 30-day historical volatility to drop to its lowest level since August. European countries are planning to restrict tankers carrying Russian crude, while the US may reduce the price cap on Russian oil to limit its funding for the war in Ukraine. In addition, the US Federal Reserve is expected to lower interest rates, potentially paving the way for China to ease its own monetary policy.
Oil prices rose on Wednesday following a drop in U.S. crude inventories and the expected interest rate cut by the Federal Reserve, though gains were limited by the Fed's signal to slow future cuts. West Texas Intermediate crude increased by 50 cents, or 0.71%, to $70.58 per barrel. The Energy Information Administration reported a decline in U.S. crude and distillate inventories, while gasoline stocks rose for the week ending Dec. 13. Total product supplied, a measure of demand, increased by 662,000 barrels per day. Although the Fed's rate cut was anticipated, investors were more focused on the central bank's forecast for just two additional quarter-percentage-point cuts by the end of 2025, which could impact economic growth and oil demand.
