Russia sanctions, low US inventories and a fall in sterling causes oil prices to rally.
Oil prices increased significantly this week, supported by a large draw in U.S. crude stockpiles and potential supply disruptions caused by new U.S. sanctions on Russia, while a Gaza ceasefire deal limited gains.
The latest round of U.S. sanctions on Russia ahead of the newly elected Trump administration taking office is likely to disrupt Russian oil supply and distribution significantly, the International Energy Agency said in its monthly oil market report.
Jitters over sanctions seem to be supporting prices, said Ole Hansen, head of commodity strategy at Saxo Bank. "Tankers carrying Russian crude seem to be struggling offloading their cargoes around the world, potentially driving some short-term tightness," he added.
Meanwhile U.S. crude oil inventories also fell to their lowest levels since 2022 this week, the U.S. Energy Information Administration reported, as some U.S sates continue to battle severe cold weather, with a further artic blast being reported for the second half of January.
Limiting the gains, Israel and Hamas agreed to a deal to halt fighting in Gaza and exchange Israeli hostages for Palestinian prisoners, according to an official.
Concerns over supply disruption eased with Israel-Hamas ceasefire deal reached, Phil Flynn, analyst at Price Futures Group, said. Investors remained focused on signs of a strengthening economy and oil demand; he added.
Brent Crude topped $81 a barrel and is up more than 8% this year with a fall in sterling adding to the momentum. Signs of continuous weakness in the UK factory activity suggest that producers are not fully utilising their operating capacity on the assumption that the already weak demand environment will worsen further after United States President-elect Donald Trump slaps hefty import tariffs globally once he takes office.
When the value of the pound falls in comparison to the US dollar, this affects import costs, which can in turn make oil prices higher within the UK.
Fuel cards users can expect an increase in the region of 4.5 – 5 pence per litre for next week, so getting fill your tanks ahead of Monday’s price change.
