Oil Market Rallies on US Crude Drop, Russian Sanctions

Brent crude futures appreciated by $2.11 or 2.64 per cent to $82.03 a barrel and the US West Texas Intermediate (WTI) crude grew by $2.54 or 3.28 per cent to close at $80.04 a barrel.

The US Energy Information Administration (EIA) reported an inventory dip of 2 million barrels for the second week of the year.

The change estimated by the EIA compared with a modest draw of around 1 million barrels for the previous week, which also saw sizable fuel inventories build that dragged oil prices lower.

For the week to January 10, the EIA estimated an inventory build of 5.9 million in gasoline, with production averaging 9.3 million barrels daily. This compared with a build of as much as 6.3 million barrels for the previous week when production averaged 8.9 million barrels daily. That build was the second sizable weekly one after 2024 ended with a build of 7.7 million barrels in gasoline inventories.

The latest round of US sanctions on Russian oil could disrupt Russian oil supply and distribution significantly, the International Energy Agency (IEA) said in its monthly oil market report.

The Paris-based agency said that the sanctions on Iran and Russia cover entities that handled more than a third of Russian and Iranian crude exports in 2024, adding that the market will be in surplus this year as supply growth led by countries outside the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ exceeds subdued expansion in world demand.

This aligns with an earlier projection by the EIA which assumes that OPEC+ would roll back its production cuts and that non-OPEC production would continue leaping forward.

Limiting the gains was fresh developments in the Middle East as Israel and Hamas agreed to a deal to halt fighting in Gaza and exchange Israeli hostages for Palestinian prisoners.

OPEC in its monthly oil report on Wednesday forecast stronger demand growth than the IEA of 1.45 million barrels per day this year and, in its first look at 2026, predicted a similar expansion of 1.43 million barrels per day next year.

OPEC expects global oil demand to rise by 1.43 million barrels per day in 2026, maintaining a similar growth rate to 2025.