Oil News: Will EIA’s Oversupply Forecast Undermine Sanctions-Driven Optimism?

Crude Oil Edges Higher, But Can It Break Key Resistance?

Light crude oil futures rose on Wednesday, maintaining gains after a three-day rally that pushed prices to their highest levels since October. The market is consolidating above $77.36, a critical support level, but faces resistance at $79.61. A breakout could target $81.33, while a failure to hold support might drive prices toward $76.05.

At 10:41 GMT, Light Crude Oil futures are trading $77.76, up $0.26 or +0.34%.

Will Sanctions on Russia Cripple Global Oil Supply?

The International Energy Agency (IEA) on Wednesday highlighted the risks posed by U.S. sanctions on Russian oil exports. These measures target over 160 vessels responsible for 22% of Russia’s seaborne oil shipments. While prior sanctions reduced vessel activity by 90%, the IEA noted that Russia might find alternative trading routes to limit the impact.

Despite the potential disruptions, the IEA forecasts global oil supply to grow by 1.8 million barrels per day in 2025, outpacing demand growth of 1.05 million barrels per day.

Are U.S. Crude Stockpiles Falling Faster Than Expected?

On Tuesday, the American Petroleum Institute (API) reported a surprising 2.6-million-barrel draw in U.S. crude inventories for the previous week, surpassing expectations of a 1-million-barrel decline. However, Cushing, Oklahoma, stockpiles rose by 600,000 barrels. Gasoline and distillate stocks saw sharp increases, rising by 5.4 million and 4.88 million barrels, respectively.

Traders now turn their attention to the Energy Information Administration’s (EIA) weekly supply report, expected later Wednesday, to confirm or challenge the API’s findings.

Is Long-Term Oversupply Keeping a Lid on Oil Prices?

The EIA’s short-term energy outlook, released Tuesday, projects that global oil production will outpace demand through 2025. Brent crude is forecast to average $74 in 2025 before declining to $66 in 2026. U.S. oil demand is expected to remain steady at 20.5 million barrels per day during this period.

These projections suggest sustained downward pressure on prices in the longer term, even as traders focus on short-term disruptions.

Did Fresh Sanctions Drive Monday’s Price Surge?

Crude oil prices jumped 2% on Monday after the U.S. Treasury announced new sanctions on Russian oil exports. Over 160 vessels tied to Russia’s shadow fleet were sanctioned, intensifying concerns over global supply.

While ING analysts estimate the sanctions could eliminate a projected 700,000-barrel-per-day surplus for this year, the actual impact may be lower as Russia seeks alternative export solutions.

Will Crude Oil Sustain Its Bullish Momentum?

Crude oil prices remain supported by geopolitical risks and tighter inventories but face strong resistance near $79.61. A breakout could push prices toward $81.33, while a reversal risks testing $77.36. Traders should closely monitor the EIA’s weekly inventory data and assess the ongoing impact of Russian sanctions for near-term trading opportunities.

More Information in our Economic Calendar.