Oil’s Glow-Up: U.S. Sanctions and Global Demand Fuel Price Surge

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MARKETS TREND

Oil prices gained for a second consecutive session on Thursday, supported by supply disruptions and rising global demand.

U.S. sanctions targeting Russian oil producers and tankers have tightened supply, forcing Moscow’s buyers to seek alternatives. Meanwhile, shipping rates have surged, adding further pressure on the global supply chain.

The U.S. Energy Information Administration (EIA) reported a significant 2-million-barrel drop in crude oil stocks last week, marking the lowest levels since April 2022. This draw far exceeded analysts’ expectations of a 992,000-barrel decline, signaling strong demand for U.S. crude. Exports surged while imports fell, compounding the supply squeeze.

Commodity analyst Rory Johnston noted that OPEC and its allies are likely to maintain cautious production levels despite recent price gains. “The producer group has faced too much volatility to ease cuts prematurely,” he explained.

Demand Accelerates with Global Events

Global oil consumption expanded by 1.2 million barrels per day (bpd) in early 2025 compared to the same period last year. JPMorgan analysts expect this figure to rise to 1.4 million bpd, driven by heightened travel in India and Lunar New Year celebrations in China. These factors underscore the robust demand trajectory for the coming weeks.

Investors are also eyeing potential Federal Reserve interest rate cuts, which could stimulate economic activity and energy consumption. Softer U.S. inflation data has fueled speculation of a shift in monetary policy, potentially boosting oil demand further.

Market Moderators: Geopolitical and Seasonal Trends

While bullish factors dominate, the Israel-Hamas ceasefire agreement has moderated some price gains by alleviating immediate geopolitical tensions. However, analysts believe that structural supply constraints and rising demand will continue to support oil prices in the near term.

Daily Technical Outlook: WTI Crude Oil – January 16, 2025

WTI Crude Oil is trading at $80.07, consolidating within an upward channel after reaching a high of $80.68. The price remains above the pivot point of $79.24, indicating bullish sentiment. Immediate resistance lies at $80.68, followed by $81.82 and $82.92. Support levels are positioned at $79.24, with deeper levels at $77.88 and $77.33.

Oil Price Chart - Source: Tradingview

The 50-day EMA at $77.88 supports the ongoing uptrend, but overbought conditions could trigger short-term pullbacks. A break above $80.68 could pave the way for further gains, while a drop below $79.24 might signal bearish corrections.

Key Insights:

  • Supply Squeeze: U.S. sanctions and a 2-million-barrel stock drop tighten the oil market.

  • Demand Surge: Travel in India and China boosts global oil consumption, with expectations of a 1.4 million bpd increase.

  • Technical Indicators: WTI remains bullish, with $79.24 as a pivotal support level.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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