Oil prices saw minimal movement on Monday, as speculation that U.S. President-elect Donald Trump might ease restrictions on Russia’s energy sector in exchange for a resolution to the Ukraine conflict balanced concerns over potential supply disruptions from stricter sanctions.
By 0229 GMT, Brent crude futures slipped 6 cents, or 0.07%, to $80.73 a barrel, following a 0.62% decline in the previous session.
Meanwhile, U.S. West Texas Intermediate (WTI) crude for February delivery, set to expire on Tuesday, rose 10 cents, or 0.13%, to $77.98 a barrel, after closing down 1.02% on Friday. The more actively traded April contract dipped by 1 cent to $77.38 a barrel.
Both benchmarks posted over 1% gains in their fourth consecutive weekly increase after the Biden administration imposed sanctions on more than 100 tankers and two Russian oil producers. This prompted top buyers, including China and India, to scramble for immediate oil shipments and increased demand for unsanctioned tankers by traders dealing in Russian and Iranian oil.
Analyst Tim Evans noted in his Evans on Energy newsletter that the new sanctions are likely to tighten supply in the short term.
“Rising tanker rates for unencumbered vessels and a widening backwardation in crude oil calendar spreads are notable ripple effects, heightening supply concerns,” Evans stated.
Backwardation, a market condition where near-term prices are higher than those for future months, signals tight supply.
On Monday, the Brent prompt monthly spread widened in backwardation by 5 cents to $1.27 a barrel, while the WTI spread rose 14 cents to 63 cents a barrel. According to ANZ analysts, the new sanctions could potentially disrupt the supply of nearly 1 million barrels per day of oil from Russia. However, they cautioned that recent price increases might be short-lived, depending on actions taken by Trump.
Trump has pledged to swiftly resolve the Russia-Ukraine conflict, which may involve easing some restrictions to facilitate an agreement, the analysts noted.
The president-elect, set to be inaugurated later on Monday, is also expected to announce a series of policy measures during the early hours of his second term. These include lifting the moratorium on U.S. liquefied natural gas export licenses as part of a broader economic strategy.
Oil price gains were further tempered by easing tensions in the Middle East. On Sunday, Hamas and Israel conducted a prisoner and hostage exchange, marking the start of a ceasefire following 15 months of conflict.
