China: Chinese refiners are increasing purchases of Brazilian and West African crude due to higher Middle Eastern oil prices and trade disruptions caused by U.S. sanctions and tariffs. Imports from Brazil are expected to reach 800,000 barrels per day in February, with further increases anticipated in March and April. The shift has driven up premiums for these crude grades by about 50% since January, as refiners seek alternatives to expensive Gulf oil. Additionally, new refineries like Shandong Yulong Petrochemical are securing large shipments from Angola and Nigeria, while state trader Unipec has bought over 20 million barrels of Brazilian crude for April delivery.

Potential Ukraine Ceasefire and Reduced Sanctions: Goldman Sachs stated that a potential Ukraine ceasefire and easing of sanctions on Russia are unlikely to significantly increase Russia’s oil exports, as its production is constrained by its OPEC+ target of 9 million barrels per day. The bank expects OPEC+ to delay its planned production increase until July due to higher compliance with output targets and ongoing U.S. policy uncertainty. Despite previous plans to raise output in April, OPEC+ extended its production cuts through Q1 2025 in response to weak demand and rising non-OPEC supply. Goldman Sachs maintains its forecast that Brent crude could reach $79 per barrel later this month.

OPEC: OPEC+ is considering delaying its planned production increases amid concerns over market stability. The alliance is weighing a postponement of its 120,000 barrel-per-day supply hike set for April, marking the fourth such delay since 2022. Meanwhile, a Ukrainian drone attack on a Russian pumping station has disrupted Kazakhstan’s crude exports, further tightening supply. OPEC+ aims to keep prices within the $70-$74 range, prioritizing price stability over market share, while traders also monitor geopolitical developments, including U.S.-Russia talks on Ukraine.

Market Overview: Oil prices rose on Wednesday due to concerns over supply disruptions in Russia and the U.S., as well as uncertainty surrounding sanctions amid U.S. peace talks on the Ukraine war. Brent crude and U.S. West Texas Intermediate (WTI) crude both saw gains, with WTI rising 2.6% from its last close before the U.S. holiday. Drone attacks on Russian oil infrastructure and cold weather in the U.S. have contributed to supply constraints, with a major pipeline in Kazakhstan losing up to 380,000 barrels per day. Market analysts are also watching for potential delays in OPEC+ supply increases, adding to price support. Meanwhile, global economic factors, including proposed tariffs by the Trump administration and ceasefire negotiations in Gaza, may influence oil demand and pricing in the future.

OPEC+ accounted for 47% of global crude oil production in 2024, with output reaching 35.7 million b/d. The group plans to increase production by 0.1 million b/d in 2025, following its agreed timeline, while phasing out voluntary cuts of 2.2 million b/d by September 2026. OPEC+’s share of global production is expected to decline to 46% in 2025 and 2026, down from 53% in 2016. Saudi Arabia, the largest OPEC producer, supplied 9.0 million b/d in 2024, a 13% decline from 2022. Russia led OPEC+ production with 9.2 million b/d, followed by Iraq (4.4million b/d), the UAE (2.9 million b/d), and Kuwait (2.5 million b/d). 

Oil prices remained near a one-week high due to concerns about supply disruptions in Russia and the U.S., with WTI crude reaching $72.21 per barrel. Ukrainian drone attacks on Russian oil infrastructure reduced crude exports by up to 380,000 barrels per day, while cold weather in North Dakota threatened to cut U.S. production by 150,000 barrels per day. Market speculation suggests OPEC+ may delay its planned April supply increase, with BNP Paribas expecting an extension of output cuts. Goldman Sachs analysts believe easing sanctions on Russia is unlikely to significantly boost oil production, as OPEC+ limits are more restrictive than sanctions. Meanwhile, upcoming U.S. inventory data is expected to show a crude stockpile increase for the fourth consecutive week, the longest streak since April 2024.