Oil retreated from a five-month high as the market adjusts to new sanctions on Russian crude and on the prospect that President-elect Donald Trump will weaken the measures.
West Texas Intermediate slid about 1.5% to below $79 a barrel after hitting the highest since July on Wednesday. Saudi Aramco has received inquiries from Indian and Chinese buyers for as much as 750,000 barrels a day of extra crude to make up for any shortfalls caused by the Russian santions. Meanwhile, the amount of oil stranded off the Chinese coast has swelled as traders and shippers try to avoid being caught in the curbs.
In the US, Trump’s advisers are crafting a sanctions strategy that could benefit sanctioned Russian oil producers and help seal a deal to end the war with Ukraine. Four days ahead of Trump’s inauguration, traders are also shuffling positions to brace for potential tariffs on Canadian oil and moves to encourage domestic production.
“Crude may take a pause to consolidate its recent gains as the market looks ahead to Monday,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. Biden’s last-minute sanctions “have shifted the landscape for Trump’s first day in office, potentially requiring adjustments to his strategy.”
West Texas Intermediate has rallied about 10% to start the year as cold weather bolsters demand for heating fuels and threatens North American output. While analysts widely expect oil prices to come under pressure this year amid subdued global demand growth and plentiful supplies, the commodity’s strong start is testing those expectations.
In the US, inventories fell for the eighth straight week to hit the lowest since April 2022. WTI’s prompt spread — the difference between the two nearest contracts — is holding above $1 a barrel, up from 42 cents a month ago, signaling a tightening market.
Crude’s gain on Wednesday came even as Israel and Hamas agreed to a ceasefire deal, bringing a temporary halt to the war in the Gaza Strip that has gone on for 15 months and touched off broader turmoil in the Middle East. The ceasefire will start on Sunday and last six weeks, Qatari and US officials said.
