SINGAPORE: Oil prices saw a slight recovery in early Asian trade on Thursday after hitting 16-week lows, with West Texas Intermediate (WTI) rising to $62.09 per barrel and Brent trading at $65.68.
This recovery was fueled by renewed expectations of tougher sanctions on Russian crude, although concerns over higher OPEC+ supply and weak U.S. economic data capped further gains.
Both WTI and Brent had fallen in the previous three sessions. On Wednesday, each benchmark dropped by approximately 1%, with Brent closing at its lowest level since June and WTI at its weakest since May.
A key factor behind the recovery is the G7 nations’ increased pressure to tighten sanctions on those facilitating Russian oil imports. In a joint statement released midweek, G7 finance ministers pledged to intensify actions against entities circumventing existing sanctions.
In addition, reports emerged that the U.S. plans to provide intelligence to support long-range missile strikes on Russian energy infrastructure, which could disrupt pipelines, refineries, and transportation routes essential to Russia’s oil export system. These developments have sparked speculative buying, particularly as WTI approached the $60 support level.
However, the price rally was tempered by ongoing expectations that OPEC+ will approve a significant production increase in November, possibly by as much as 500,000 barrels per day. Saudi Arabia is reportedly keen to regain market share, although OPEC has dismissed these reports.
Adding to the downward pressure on prices, the U.S. Energy Information Administration (EIA) reported a larger-than-expected build in U.S. crude inventories. Stocks rose by 1.8 million barrels to 416.5 million barrels for the week ending September 26, surpassing expectations of a 1 million-barrel increase. This inventory rise reflects weaker refining activity and soft fuel demand, signaling a slowdown in key sectors.
The outlook for oil prices in the near term will depend largely on the effectiveness of sanctions on Russia and how aggressively OPEC+ moves to increase output. Any disruption to Russian oil exports, particularly from a tightening of sanctions or logistical challenges, could lead to tighter trading balances and support prices.
