Oil Maintains Gains Amid Anticipation of New Sanctions on Russia

SadaNews - The price of oil stabilized after two days of gains, as investors evaluated the likelihood of new Western sanctions on Russian exports, against concerns of an impending global supply glut.

Brent crude traded above $67 a barrel after gaining 1.6% over the previous two sessions, while West Texas Intermediate hovered around $63. The European Union is considering imposing sanctions on companies in India and China suspected of facilitating Russian oil trade, as part of a new package of restrictions, according to informed sources.

Since Russia's invasion of Ukraine in 2022, China and India have become the largest importers of Russian oil. In an effort to halt the war, Washington imposed "secondary" tariffs of 50% on New Delhi but has so far exempted Beijing. U.S. Treasury Secretary Scott Bensent stated that the United States will not impose direct sanctions on Russian crude unless accompanied by a similar European move.

Geopolitical Risks vs. Expected Glut

Oil futures have been trading within a narrow range for about a month, amid a conflict between elevated geopolitical tensions and downward fundamental factors, most notably the return of OPEC+ supply at a faster pace than expected. The International Energy Agency forecasted a record glut next year.

Gao Mingyu, chief energy analyst at SDIC Essence Futures, stated: "Geopolitical risks support the market in the short term, but glut pressures are increasing in the medium term."

He added that the global surplus could reach 2.67 million barrels per day in 2026, compared to 1.64 million this year, with the surplus concentrated in the first quarter of the year.

Black Gold Awaits the Fed

Commodities, including oil, may find support from the expected decision of the Federal Reserve this week to cut interest rates, which represents a potential boost to the U.S. economy and energy demand.

However, some market indicators show signs of weakness. The "spot spread" for Brent contracts – the difference between the two nearest futures contracts – fell to 40 cents a barrel, down from nearly a dollar two months ago, indicating a diminishing condition known as "backwardation."