By Giulia Petroni


Here is a look at what happened in oil markets in the week of Jan. 13-17 and what the focus will be in the days to come.


OVERVIEW: Oil prices are on course for weekly gains, boosted by concerns over supply disruptions following the latest round of U.S. sanctions on Russia. Brent crude, the international oil benchmark, is currently around $81 a barrel, while the U.S. oil gauge, West Texas Intermediate, trades just shy of $78 a barrel. From a technical standpoint, analysts say the market might be in overbought territory, and that current price levels are unlikely to be sustained due to OPEC+'s high spare capacity and projections of a supply surplus. Traders now await the return of President-elect Donald Trump to the White House next week to get more clarity on future U.S. policy and its impact on prices.


MACRO: The latest U.S. inflation report suggested underlying price pressures are easing, sparking some renewed optimism for a potentially less restrictive stance by the Federal Reserve on interest rates. The so-called core CPI--which excludes volatile food and energy prices--rose 0.2%, its smallest gain since July and less than the 0.3% increase expected by economists. Meanwhile, U.S. retail sales rose 0.4% last month from November, just shy of economists' expectations of a 0.5% gain, but still pointed to resilient consumer spending despite relatively elevated interest rates.

The U.S. central bank is set to meet at the end of the month and has made widely clear that it is taking a break from rate cuts. Higher rates typically lead to a stronger dollar, which makes oil and other commodities more expensive for holders of other currencies.


GEOPOLITICAL RISKS: Crude futures soared to multi-month highs after the Biden administration imposed sweeping sanctions on two major Russian producers and dozens of vessels shipping Russian oil, forcing refiners in China and India to seek alternative supplies.

But the oil price rally was halted by news that Israel and Hamas agreed to a cease-fire deal after 15 months of fighting. The conflict has ultimately had little impact on the physical market, but the agreement further eases concerns over supply disruptions and a wider conflict in the region involving oil producer Iran, putting some downward pressure on crude.


SUPPLY AND DEMAND: It has been a busy week for oil markets, with major forecasters releasing their monthly reports on supply-and-demand balances.

The International Energy Agency sees an acceleration in global oil-demand growth this year, but still expects the market to be in surplus. The Paris-based organization forecasts demand to grow by 1.05 million barrels a day, while supply is expected to rise by 1.8 million barrels a day led by non-OPEC+ producers.

The organization also said current U.S. sanctions on Russia and Iran could tighten crude and product markets, as they affect entities that operated over a third of Russian and Iranian crude exports last year.

OPEC instead stuck to its demand forecast for this year and projected broadly stable growth into 2026. The cartel expects demand to grow by 1.45 million barrels a day this year and forecast growth of 1.43 million barrels a day the next--a much more optimistic outlook compared to others in the industry.

The U.S. Energy Information Administration projected weaker oil prices this year and next on expectations that supply will outpace demand. The organization also reported a fall in U.S. crude oil inventories amid declines in imports and domestic production in the week ended Dec. 10, while product stocks saw large weekly builds.


WHAT'S AHEAD: Markets are eagerly waiting to see what the first days of Trump's second term will bring, from trade tariffs on China and Canada to sanctions against Russia and Iran.

The potential lifting of the Biden administration's moratorium on new permits to export LNG and of a ban on new offshore oil-and-gas developments along most U.S. coastlines has been partly priced in by the market, according to Commerzbank Research analysts.

"Of more interest to oil market participants is how the U.S. president will position himself on sanctions against Russia and Iran," they said. "The big question now is whether Trump will tighten the sanctions against Iran further, as he did in his first term in office." If so, oil prices would likely jump further. But it is also likely that the future president will rather avoid a price surge, the analysts said.


Write to Giulia Petroni at giulia.petroni@wsj.com


(END) Dow Jones Newswires

01-17-25 1119ET