In early Asian trade on Thursday, oil prices recovered slightly from 16-week lows, with WTI rising to $62.09 and Brent trading at $65.68. Markets were buoyed by renewed expectations of tougher sanctions on Russian crude, even as caution over higher OPEC+ supply and weak U.S. economic signals capped upside.
The two benchmarks had suffered across the prior three sessions. On Wednesday, Brent and WTI each fell roughly 1 %, with Brent closing at its lowest since June and WTI at its weakest since May.
A key driver of the recovery is intensifying pressure from the G7 nations to tighten sanctions on entities still buying or facilitating Russian oil imports. In a joint statement released midweek, G7 finance ministers pledged to “increase pressure” targeting those circumventing existing measures.
In parallel, reports surfaced that the U.S. intends to supply Ukraine with intelligence to support long-range missile strikes on Russian energy infrastructure – a move that could disrupt pipelines, refineries, and transportation routes vital to Russia’s oil export system.
These prospects of supply disruption have lured speculative buying as WTI approached the psychologically important $60 support zone.
Offsetting any upward momentum, expectations persist that OPEC+ will approve a substantial production increase in November, with speculation of as much as 500,000 barrels per day. Saudi Arabia, in particular, is reportedly seeking to reassert its market share. With that said, OPEC has rejected those reports.
That potential supply growth looms large amid signs of softening demand, especially in the U.S., and lingering worries over the macro outlook following a U.S. government shutdown.
Adding to headwinds, the Energy Information Administration reported that U.S. crude inventories climbed by 1.8 million barrels to 416.5 million barrels for the week ended September 26, exceeding expectations of a 1 million-barrel build. This build reflects weaker refining activity and soft fuel demand.
Growing inventories of distillates and gasoline suggest that consumption is struggling in key sectors.
The near-term oil outlook hinges on whether sanctions on Russia can materially curtail flows and how aggressively OPEC+ moves to ramp up output. The shock value of fresh restrictions could tighten trading balances, especially if Russia’s ability to ship oil is impaired. The shadow fleet of tankers used to circumvent sanctions remains under pressure, and further enforcement could strain Russian exports.
By Charles Kennedy for Oilprice.com
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