Crude Oil Pumping to New Highs? Sanctions & Supply Drama Fuel the Fire

Crude oil prices continued their upward trajectory on Friday, heading for a fourth consecutive weekly gain.

The latest round of U.S. sanctions on Russian oil producers and tankers has created significant supply constraints, driving up spot trade prices and shipping rates globally.

Analysts at Fujitomi Securities highlighted the dual impact of tightened supply and improved demand forecasts. “The expected rise in kerosene demand due to colder weather in the U.S. adds to bullish sentiment,” said Toshitaka Tazawa.

The Biden administration announced sweeping measures against Russia’s energy and military-industrial sectors, causing Moscow’s top buyers, China and India, to seek alternative suppliers, further inflating shipping costs.

Adding to the market’s uncertainty, Donald Trump’s upcoming inauguration has led to speculation about potential supply disruptions tied to stricter policies on Iran and Venezuela. ING analysts noted, “Mounting supply risks are providing broad support to oil prices.”

Economic Signals Support Demand Outlook

Optimism surrounding demand recovery is also bolstering crude prices. Easing inflation in the U.S. has renewed hopes for Federal Reserve rate cuts. December inflation data showed a slowdown, with Federal Reserve Governor Christopher Waller suggesting, “Rates could be cut sooner and faster if inflation continues to ease.”

In China, robust economic data for Q4 2024 exceeded expectations, buoyed by government stimulus. However, refinery throughput for 2024 saw its first significant decline in decades due to weak domestic fuel demand and reduced margins, tempering overall market enthusiasm.

Geopolitical Developments and Market Impact

Tensions in the Middle East are easing as Yemen’s maritime officials report a potential halt in Red Sea attacks following a Gaza ceasefire. While these attacks disrupted global shipping routes for over a year, this development could alleviate logistical challenges.

However, traders remain cautious about the evolving geopolitical landscape and its implications for the crude oil supply chain.

Technical Outlook: WTI Crude Oil

WTI Crude Oil prices are consolidating near $78.31, up 0.02% for the day. Immediate resistance is seen at $79.27, with further targets at $80.58 and $81.82. Key support lies at $77.21 (pivot point), followed by $76.85 and $75.61.

Crude Oil Price Chart - Source: Tradingview

The 50-day EMA at $76.85 reinforces short-term bullish momentum, while a breakout above $79.27 could confirm further gains. Traders should monitor these levels closely, as a failure to hold above $77.21 may trigger bearish corrections.

Key Takeaways:

  • U.S. Sanctions: New sanctions on Russian oil heighten global supply concerns.

  • Fed Rate Cuts: Easing U.S. inflation fuels expectations for rate cuts, supporting demand recovery.

  • Resistance Levels: WTI faces immediate resistance at $79.27; support holds at $77.21.

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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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