Oil prices fell due to rising US inventories, but sanctions against Russia are holding back the decline

Oil prices fell on Wednesday after an industry report showed a build-up in crude inventories in the United States, the world’s largest consumer, fueling concerns about oversupply. However, the price decline was limited by sanctions against Russian oil, UNN reported, citing Reuters.

DetailsBrent crude futures were down 22 cents, or 0.3%, at $64.67 a barrel by 07:30 GMT (09:30 Kyiv time) after rising 1.1% in the previous session. U.S. West Texas Intermediate crude futures fell 17 cents, or 0.3%, to $60.57 a barrel after gaining 1.4% on Tuesday.

U.S. crude and fuel inventories rose last week, market sources said late Tuesday, citing data from the American Petroleum Institute. Crude inventories rose by 4.45 million barrels in the week ended November 14, while gasoline stocks increased by 1.55 million barrels and distillate stocks by 577,000 barrels, API reported, according to the sources.

“Overall, the report was relatively bearish,” ING commodity strategists said, though they cautioned: “Market participants seem more concerned about supply risks than the prospect of a future surplus.”

U.S. sanctions against major Russian producers Rosneft and Lukoil set a deadline of November 21 for companies to cease cooperation with these Russian companies.

On Monday, the U.S. Treasury Department said that sanctions, which are already limiting Russia’s oil revenues, are expected to lead to a reduction in its export volumes. Oil buyers in China and India have begun to switch to alternative suppliers.

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“Benchmark prices are range-bound as the market tracks the impact of sanctions (November 21), although there is downward pressure amid oversupply,” said Emril Jamil, senior oil industry analyst at LSEG.

Prices rose on Tuesday as investors factored in the impact of U.S. sanctions and attacks on Russian refineries and export terminals, which heightened concerns about disruptions to oil and fuel supplies.

Concerns about supplies from Russia are being weighed against analysts’ forecasts that oil production exceeds current demand, putting pressure on prices.

Following attacks on Russian energy and port facilities, diesel profitability in Europe surged, reaching its highest level since September 2023 on Tuesday amid rising refinery margins worldwide.

“Oil prices have found support in a strong diesel market, but the persistent oversupply of crude oil is making investors cautious about chasing further oil price gains,” analysts at Chinese brokerage Haitong Futures noted.

Official U.S. government data on oil inventories will be released later on Wednesday. Eight analysts surveyed by Reuters before the release estimated that crude inventories likely fell by an average of about 600,000 barrels in the week ended November 14.

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