Oil Prices Rise Amid Supply Concerns

By Siyi Liu

SINGAPORE - Oil prices have increased for the second consecutive session on Thursday. The rise is fueled by concerns over supply shortages due to U.S. sanctions against Russia, a larger-than-expected decline in oil stocks, and a brighter global demand outlook.

Brent crude futures climbed by 25 cents, or 0.3%, reaching $82.28 per barrel by 0446 GMT. This follows an impressive increase of 2.6% in the previous day, marking the highest prices since July 26, 2022.

Meanwhile, U.S. West Texas Intermediate (WTI) crude futures rose by 28 cents, or 0.4%, hitting $80.32 a barrel, after a 3.3% gain on Wednesday, the highest point since July 19, 2022.

The Energy Information Administration (EIA) reported that U.S. crude oil inventories fell last week to their lowest level since April 2022, attributed to a rise in exports and a decline in imports. The draw of 2 million barrels was significantly above the estimated 992,000 barrels that analysts had anticipated.

This drop in oil stocks contributes to a tighter global supply outlook, intensified further by the recent U.S. sanctions on Russian oil producers and their shipping services. These sanctions have pushed Russia's main buyers to search for alternative suppliers, leading to increased shipping costs as well.

On Wednesday, the Biden administration enacted hundreds of new sanctions aimed at Russia's military sector and its associated evasion tactics.

Despite the current rally in oil prices, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, who have been collectively reducing output over the last two years, are expected to tread cautiously regarding any increase in production. According to Rory Johnston, founder of Commodity Context, the group has faced many setbacks in their expectations over the year and is likely to be careful before making adjustments to production levels.

Adding to the complexity, an agreement was reached between Israel and Hamas to cease hostilities in Gaza and to exchange hostages, which may influence market dynamics as well.

From a demand perspective, the global oil market saw a growth of 1.2 million barrels per day in early 2025 compared to the same weeks last year, although this figure was slightly below analysts' predictions. Experts from JPMorgan expect an increase in oil demand of 1.4 million barrels per day in the upcoming weeks, driven by increased travel in India due to a major festival and the approach of the Lunar New Year, which often boosts travel in China.

Some investors are also looking at the possibility of interest rate cuts by the U.S. Federal Reserve before year-end, following recent data showing a slowdown in core U.S. inflation. Lower interest rates could support economic activities and increase energy consumption.

Oil, Prices, Supply