Oil prices moved higher on Wednesday, supported by concerns over supply disruptions in both Russia and the U.S., while markets awaited further clarity on sanctions as the U.S. attempts to broker a deal to end the war in Ukraine.
Brent crude futures rose by 60 cents, or 0.8%, to $76.44 per barrel, marking a third consecutive day of gains. Meanwhile, U.S. West Texas Intermediate (WTI) crude for March delivery increased by 63 cents, or 0.9%, to $72.48, reflecting a 2.4% rise from last week's close before the U.S. public holiday on Monday.
With the March contract set to expire on Thursday, the more actively traded April contract also advanced by 60 cents, or 0.8%, to $72.43.
BNP Paribas commodities strategist Aldo Spanjer commented, “The market is grappling with three bullish factors: Russia, Iran, and OPEC. Traders are assessing the impact of both announced and actual sanctions.”
Supply Disruptions in Russia and the U.S.
Uncertainty persists regarding whether U.S. sanctions on Russia will be lifted following discussions between U.S. and Russian officials in Riyadh. However, Spanjer believes it is too early for such a move.
At the same time, drone attacks on Russian oil infrastructure have reduced supply levels. Russia reported that oil flows through the Caspian Pipeline Consortium (CPC)—a major export route for Kazakh crude—fell by 30-40% on Tuesday after a Ukrainian drone attack on a pumping station. A 30% reduction translates to an estimated loss of 380,000 barrels per day (bpd), according to Reuters calculations.
In the U.S., extreme cold weather has also affected oil production. The North Dakota Pipeline Authority estimates that output in the state could decline by as much as 150,000 bpd due to freezing temperatures.
Tony Sycamore, a market analyst at IG, noted, “The psychologically important $70 level for oil prices appears to have held firm, supported by the Ukrainian drone attack on Russian infrastructure and concerns over U.S. cold weather disruptions.”
Additionally, there is speculation that OPEC+ may reconsider its planned supply increase in April, with some analysts, including BNP’s Spanjer, expecting the group to extend existing output cuts.
Sanctions, Tariffs, and Middle East Geopolitics
While there is ongoing speculation about a U.S.-brokered peace deal between Russia and Ukraine, Goldman Sachs analysts believe any associated easing of sanctions on Russia is unlikely to significantly impact global oil supply.
“We believe Russian crude oil production is constrained by its OPEC+ production target of 9 million barrels per day rather than by current sanctions, which are affecting the destination but not the volume of exports,” Goldman Sachs stated in a report.
Elsewhere, indirect negotiations between Israel and Hamas on a second phase of a Gaza ceasefire deal were announced on Tuesday. If successful, a ceasefire could ease concerns over supply disruptions and apply downward pressure on oil prices.
Meanwhile, new tariffs proposed by the Trump administration could also influence oil markets. Trump announced plans to impose auto tariffs of approximately 25%, along with similar duties on semiconductors and pharmaceutical imports. Analysts warn that such tariffs could increase consumer costs, slow global economic growth, and reduce fuel demand.
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