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(Bloomberg) — Oil edged higher after dropping by the most in more than a month as the impact of US sanctions against Russian flows continued to reverberate, and an industry report pointed to lower US stockpiles.
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West Texas Intermediate rose toward $78 a barrel, after losing 1.7% on Tuesday on expectations for a ceasefire between Israel and Hamas, while Brent ended below $80. The American Petroleum Institute said crude inventories fell by 2.6 million barrels last week, according to a document seen by Bloomberg. That would be an eighth draw if confirmed by government data later Wednesday.
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The effect of the latest US sanctions is rippling through markets. Buyers of Russian oil are increasingly turning to other OPEC+ suppliers, as nations including India said they would bar sanctioned tankers. In China, state oil companies and large private refiners have been snapping up cargoes from the Middle East and elsewhere in preparation for disruption. Freight costs have surged, while US physical pricing patterns have also shifted.
Crude has seen a strong start to the year, with the latest US sanctions adding to gains driven by a colder Northern-Hemisphere winter sending heating demand higher, and a steady fall in US stockpiles. The early advance runs counter to widespread expectations that prices would struggle in 2025 as supplies were tipped to run ahead of demand, driving a global surplus.
In addition to the ructions caused by the US sanctions, traders are weighing the implications of President-elect Donald Trump’s second term in the White House, including the threat of tariffs that could ensnare Canadian oil. Ahead of the Jan. 20 inauguration, discounts on heavy Canadian crude to WTI have been widening.
The outlook for market balances will be in focus Wednesday as both the Organization of Petroleum Exporting Countries and the International Energy Agency issue monthly outlooks. On Tuesday, the US Energy Information Administration’s latest report signaled projections for a wider glut in 2025.
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