Oil Prices Climb Amid Supply Concerns

By Siyi Liu

SINGAPORE - Oil prices have increased for a second consecutive session, fueled by growing concerns over supply issues stemming from U.S. sanctions on Russia and a significant unexpected decline in oil inventories. Additionally, there is an uptick in the global demand outlook.

Brent crude futures rose by 25 cents, or 0.3%, reaching $82.28 per barrel by 0446 GMT. This follows a 2.6% increase in the previous session, marking the highest level since July 26 of last year.

Meanwhile, U.S. West Texas Intermediate crude futures increased by 28 cents, or 0.4%, to $80.32 a barrel, after experiencing a substantial 3.3% rise on Wednesday, hitting their highest since July 19.

Recent data from the Energy Information Administration (EIA) revealed that U.S. crude oil stockpiles fell last week to the lowest levels seen since April 2022. This decline was attributed to an increase in exports and a decrease in imports, resulting in a draw of 2 million barrels. Analysts had anticipated a smaller drop of 992,000 barrels, thus the actual figure heightened supply concerns globally.

The shrinking inventories contribute to a tightening global supply situation, particularly following the U.S. government’s decision to impose more comprehensive sanctions on Russian oil producers and their tankers. These new measures have compelled Moscow's primary customers to search for alternative sources of oil, causing shipping rates to escalate.

On Wednesday, the Biden administration announced numerous sanctions targeting Russia's military industrial sector and its evasion operations, further impacting the oil market.

The Organization of the Petroleum Exporting Countries (OPEC) and its allied nations have been cautious about increasing production despite recent price increases. According to industry expert Rory Johnston, the producer group has faced frequent setbacks in the past year and is likely to remain cautious before adjusting output levels.

On the diplomatic front, a deal has been reached between Israel and Hamas to pause hostilities in Gaza and to exchange hostages, which could influence market sentiment.

From a demand perspective, global oil consumption grew by 1.2 million barrels per day in early 2025 compared to the same two-week period last year, although this was slightly below expectations. Analysts at JPMorgan project that oil demand will rise by 1.4 million barrels per day in the coming weeks, largely driven by heightened travel activity in India during a major festival and increased travel for the Lunar New Year celebrations in China.

Furthermore, some investors are keeping a close watch on potential interest rate cuts by the U.S. Federal Reserve, which could occur before the year's end, given recent reports indicating a decrease in core U.S. inflation. Such measures may support overall economic activity and boost energy consumption.

Oil, Prices, Supply