Crude oil prices extended gains in the Asian session on Wednesday, with Brent futures rising by 0.35% to $77.32 per barrel and WTI futures increasing by 0.50% to $74.61 per barrel at 4:35 AM today, reaching their highest levels since October 14.
The price increase follows nearly a 1% gain in both benchmarks on Tuesday, highlighting how concerns over supply disruptions and increased winter energy demand have overshadowed broader economic uncertainties.
Crude oil prices are on track for a third consecutive weekly rise after hitting near three-year lows earlier in December.
Possible Supply Disruptions Due to Geopolitical Tensions
Growing concerns over limited supply from Iran and Russia have recently driven crude oil futures prices higher. The Biden Administration plans to impose more sanctions on Russian oil exports ahead of Donald Trump’s inauguration on January 20.
The outgoing U.S. administration will target tankers transporting Russian crude priced above the $60-per-barrel cap set by the U.S. and its European allies. Meanwhile, Trump is expected to reinforce restrictions on Iran’s oil exports upon taking office, potentially causing a supply disruption of up to one million barrels per day—approximately 1% of global supply.
On Monday, China’s Shandong Port Group issued a notice banning U.S.-sanctioned oil tankers, three oil traders told Reuters. Shandong Port, a major oil import hub for China’s eastern coast, manages three key terminals. This embargo is expected to exacerbate supply restrictions for Iranian oil.
Furthermore, Bloomberg reported that Russian crude production in December fell below the OPEC+ target, with the country producing 8.971 million barrels per day in the last month of 2024—7,000 barrels per day less than the agreed quota.
OPEC+ has postponed its plan to ease joint production cuts amid a slowdown in global demand and rising U.S. output last month. The organization, which supplies about half of the world’s oil, decided to delay its production increase by three months and a full recovery of production by an entire year to the end of 2026.
U.S. Crude Inventory Decline
Data from the American Petroleum Institute (API) indicated that U.S. crude oil inventory may have dropped for the seventh consecutive week ending January 5.
If this trend is confirmed by the Energy Information Administration (EIA) report later today, it could signal rising energy demand amid a harsh winter in the U.S., Europe, and Asia.
Positive economic data recorded in the U.S. and Europe may have also added upward momentum to oil prices. U.S. job openings in the JOLTS report rose to 8.1 million at the end of November, the highest level since May 2023.
The ISM Services PMI also showed that economic activity in the services sector expanded for the sixth consecutive month in December.
In the Eurozone, business activity accelerated more than expected in major economies, including Spain, Italy, France, and Germany, last month.
Potential Technical Correction
However, some analysts warn that the rise in oil prices may soon come to an end. Crude oil markets may face a potential technical correction risk due to overbought signals.
Technical analysts often use indicators that measure price movements relative to historical averages. Rapid price increases or decreases often trigger reversals as market participants adjust to perceived excessive reactions.
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