Oil Prices Hit Five-Month High

Oil prices surged to a five-month high as Brent crude traded above $81 per barrel, driven by tightening supplies. The rally was supported by an eighth consecutive weekly drop in US crude inventories, signaling robust demand.

Sanctions Add Pressure to Global Oil Markets

President-elect Donald Trump’s team is crafting sanctions aimed at facilitating a Russia-Ukraine accord, while also targeting Iran and Venezuela. These sanctions could disrupt Russian supply chains, leading global buyers to seek alternatives.

India and China React to Potential Shortfalls

India’s state refiners are expediting payments for existing Russian purchases, while Chinese buyers face stranded oil supplies due to sanctions. Saudi Aramco has received inquiries for an additional 750,000 barrels per day from these nations, reflecting their need for stable sources.

Cold Weather Boosts Heating Demand

The rally in crude prices is partly due to cold weather, which has increased demand for heating fuels. North American output faces challenges as demand for energy-intensive heating rises.

Market Backwardation Reflects Tightening Supply

West Texas Intermediate crude’s prompt spread widened significantly, signaling a tightening market. This pattern, known as backwardation, highlights robust near-term demand.

Analysts Warn of Pullbacks Despite Rally

While the rally is driven by strong fundamentals, analysts caution that technical indicators suggest oil markets are in overbought territory. Pullbacks may occur, but the overall trajectory remains bullish.