Crude Prices Rise on Supply Risks

March WTI crude oil on Wednesday closed up +0.40 (+0.56%), and March RBOB gasoline  closed down -0.0002 (-0.01%).

Crude oil prices on Wednesday traded higher, extending Tuesday's gains that were driven by a drone attack on a Russian pumping station that could reduce Kazakhstan crude oil exports by 30%.  Tuesday's gains were also driven by a Bloomberg report that OPEC+ is considering a delay of monthly supply increases that are currently due to start in April.  

Oil prices also saw support from reports that the G7 is considering tightening the price cap on Russian oil exports, with a view towards further reducing Russian oil exports and revenue and increasing the pressure on Russia to negotiate an end to the Russian-Ukraine war.

US-Russian relations

On the bearish side, oil prices continue to be undercut by the thaw in US-Russian relations and possible peace talks on the Russia-Ukraine war, which could eventually lead to reduced sanctions on Russia and the full resumption of Russian oil exports.

Crude oil prices have support from expectations for tighter US sanctions on Iranian oil exports after US Treasury Secretary Bessent said last week the US aims to cut Iranian oil exports by more than 90%.  The US Treasury, in early February, sanctioned an international network facilitating the shipment of Iranian crude oil to China.  

Crude found support when Politico reported last Monday that EU countries may begin seizures of Russia's illegal shadow fleet of oil-exporting tankers in the Baltic Sea using international law to grab vessels on environmental and piracy grounds.  Meanwhile, the US on January 10 imposed new sanctions on Russia's oil industry that could curb global oil supplies.  The measures targeted Gazprom Neft and Surgutneftgas, which exported about 970,000 bpd of Russian crude in the first 10 months of 2024, accounting for about 30% of its tanker flow, according to Bloomberg data.  The US also targeted insurers and traders linked to hundreds of tanker cargoes.  Weekly vessel-tracking data from Bloomberg showed Russian crude exports fell by -130,000 bpd to 3.09 million bpd in the week to February 2.  Russian oil production fell to 8.062 million bpd in January, which was -16,000 bpd below its OPEC+ quota.