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Supply Constraints Initially Support Prices
Early in the week, oil prices found bullish momentum as supply-side risks emerged. Russian crude production slipped below its OPEC+ quota, falling to 8.962 million barrels per day, while U.S. sanctions on Russian oil shipments created logistical bottlenecks. Iran also faced increasing export restrictions due to new U.S. sanctions, reinforcing expectations of tighter global supply.
These disruptions, combined with technical strength, encouraged traders to push crude prices higher. With WTI climbing above key moving averages, momentum suggested a possible test of $74.94 per barrel—a level that had previously acted as resistance. However, optimism faded as demand concerns took center stage later in the week.
Rising U.S. Inventories and Hawkish Fed Weigh on Oil Prices
Bearish sentiment intensified midweek as U.S. crude inventories surged. The American Petroleum Institute (API) reported a massive 9.4-million-barrel stockpile build, raising fears of oversupply. While gasoline and distillate inventories declined, the crude build signaled weakening refinery demand. Traders awaited official data from the Energy Information Administration (EIA) for confirmation, but the initial numbers dampened price support.
Adding to the pressure, Federal Reserve Chair Jerome Powell maintained a cautious economic outlook, signaling that rate cuts were unlikely in the near term. Higher borrowing costs typically slow economic activity, reducing industrial and consumer fuel consumption. Market participants also kept a close eye on inflation data, which could influence the Fed’s policy stance moving forward.
Ukraine Peace Talks Spark Fears of Increased Supply
A potential peace deal between Russia and Ukraine emerged as another headwind for crude markets. Reports suggested that both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy expressed interest in negotiations, with former U.S. President Donald Trump playing a role in initiating talks. If a resolution is reached, sanctions on Russian crude could be lifted, adding barrels back to the global market.
The prospect of easing restrictions pressured Brent and WTI prices lower, with traders speculating that a diplomatic breakthrough could flood the market with additional supply. Meanwhile, the International Energy Agency (IEA) indicated that Russia might sustain its export levels through alternative trade routes, further weighing on sentiment.
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