Oil Steady After Three-Day Drop With Focus on Russia, Stockpiles
(Bloomberg) -- Oil held a three-day drop as investors assessed the impact of Western sanctions against leading Russian crude producers, alongside a mixed industry estimate of US inventory changes.
Brent traded above $64 a barrel after falling more than 2% over the prior three sessions, while West Texas Intermediate was near $60. US President Donald Trump will follow through and enforce harsh new sanctions against Moscow to pressure Vladimir Putin into negotiations to end the war in Ukraine, according to Matthew Whitaker, the US ambassador to NATO.
Meanwhile, the US industry report showed a 4-million-barrel drop in nationwide crude holdings, along with draws in gasoline and distillates. Still, the snapshot also flagged a rise in oil inventories at the key hub at Cushing, Oklahoma. Official figures are due to be released later Wednesday.
Oil is on track to notch a third monthly decline, with prices dragged lower by expectations for a global surplus as OPEC+ raises production. The alliance is set to meet this weekend, and may sign off on another increase in supply. Traders are also tracking progress toward a US-China trade deal, with Trump and Chinese counterpart Xi Jinping due to meet on Thursday.
“The underlying fundamentals in the oil market remain bearish: OPEC+ continues to increase supply, while the market moves deeper into surplus,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. “Obviously, sanctions on Russia are still the key uncertainty, and this is something that we will need to wait a bit longer on for clarity.”
Last week, the Treasury Department blacklisted Rosneft PJSC and Lukoil PJSC, Russia’s biggest oil producers, and traders are watching for signs of the impact. US officials have said the administration’s plan is to make Russia’s trade costlier and riskier, but without spiking prices. In Asia, India’s state-run refiners are considering whether they can continue to take some discounted Russian cargoes by leaning on non-sanctioned suppliers.
Also on traders’ radars on Wednesday is a meeting at the US Federal Reserve, which may shape broader appetite for risk assets including commodities. Policymakers are expected to lower rates by a quarter-percentage point.
In products, the premium of European diesel futures to Brent contracts — known as a crack — hit the highest in more than 20 months this week as a combination of sanctions on Russia and refinery outages threaten supplies.
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