Oil News: Will EU Sanctions Against Russia Push Crude Oil Into Bullish Territory?

Geopolitical Risks and Chinese Demand Propel Prices Higher

Crude oil prices ended the week strong, with West Texas Intermediate (WTI) futures closing at $71.29, gaining 6.09% for the week and marking a three-week high. A potent mix of geopolitical tension, tightening supply expectations, and increasing demand optimism drove this rally, reinforcing a bullish tone for the near term.

European Union Sanctions and Global Supply Pressures

Supply concerns were heightened by the European Union’s implementation of its 15th sanctions package against Russia. These measures targeted Russia’s shadow tanker fleet, a crucial workaround for maintaining crude exports under prior restrictions. This latest round of sanctions, coupled with anticipated U.S. actions, is set to further constrain Russian oil flows, adding to global supply pressures.

Simultaneously, Western nations, including the UK, France, and Germany, signaled their readiness to reinstate international sanctions on Iran to curb its nuclear ambitions. These geopolitical moves underscore the tightening crude supply outlook as OPEC+ extends its production cuts through 2026.

China Drives Demand Recovery

China’s resurgence in oil demand further fueled the market’s bullish momentum. November crude import data showed a 14% annual increase, breaking a seven-month streak of declines. Refiners took advantage of lower crude prices and ample quotas to stockpile supplies, with Saudi Arabia remaining a key supplier due to competitive pricing.

Beijing’s announcement of its first monetary policy easing in over a decade injected additional optimism. While the move is designed to support the struggling economy, rising imports suggest Chinese refiners are gearing up for stronger demand into early 2025.

Global Demand and Supply Forecasts

While the current demand environment is improving, the International Energy Agency’s (IEA) latest outlook highlights potential headwinds beyond 2024. The agency projects a supply surplus by 2025, driven by output increases from non-OPEC+ producers such as Brazil, Guyana, and the United States. However, with OPEC+ maintaining output cuts and delaying production increases, the market remains well-supported for now.

Market Forecast: Bullish Momentum Likely to Persist

Crude oil prices are positioned for further gains in the short term. Tightening global supplies, robust Chinese imports, and geopolitical tensions will likely keep prices elevated. WTI is set to challenge higher levels, with upside targets firmly in play. While the longer-term supply picture suggests some moderation, the immediate outlook remains resolutely bullish, supported by strong fundamentals. Traders should expect continued strength into the coming weeks.

Technically, a sustained break above the 50% retracement level at $71.53 could trigger an upside acceleration toward the target at $74.42. However, if price breaks decisively below the $69.11 support level, momentum will turn bearish. A sustained move under $66.53 would confirm the downtrend’s resumption.

More Information in our Economic Calendar.