Recap: The oil market on Thursday added to its sharp gains posted on Wednesday after U.S. President Donald Trump introduced new sanctions on Russia’s two largest oil companies, Rosneft and Lukoil over Russia’s war in Ukraine. The U.S. also threatened to take further action if Russia did not agree immediately to a ceasefire in Ukraine. The European Union sanctioned the two Russian oil companies last week as well. The crude market surged higher as the sanctions are leading India and China to stop buying Russian oil and seek alternative supplies. The crude market gapped higher on the opening from $59.83 to $59.94 but quickly backfilled that gap as it posted a low of $59.64. However, the market continued to rally higher on reports that Indian refiners plan to reduce or completely halt its import of Russian oil. The market extended its gains to over $3.60 as it posted a high of $62.20 by mid-day in light of the news that Chinese state oil majors are suspending their Russian oil purchases due to concerns over the sanctions. The market’s gains seemed to have been limited by comments made by Kuwait’s Oil Minister that OPEC is ready to offset any shortage in the market by rolling back their output cuts further. The market later settled in a sideways trading range. The December WTI contract settled up $3.29 at $61.79 and the December Brent contract settled up $3.40 at $65.99. The product markets ended the session sharply higher, led by the heating oil market, which settled up 15.34 cents at $2.4030, while the RB market settled up 6.19 cents at $1.9269.
Technical Analysis: The crude market will remain well supported by the news of the sanctions imposed on Russia, with the country’s two largest oil importers suspending their Russian oil purchases. The market will keep an eye on whether the U.S. sanctions will result in a fundamental shift in supply and demand. Resistance is seen at $62.20, $62.31, $62.47, $62.80 followed by $64.86 and $65.77. The market is seen finding support at $59.82, $59.64, $59.08, $58.34, $58.09, $57.34, $56.35 and $55.96.
Fundamental News: Industry sources said Indian refiners are poised to sharply curtail imports of Russian oil to comply with new U.S. sanctions on Russia’s Rosneft and Lukoil, potentially removing a major hurdle to a trade deal with the United States. Privately-owned Reliance Industries, the top Indian buyer of Russian crude, plans to reduce or halt completely its import of Russian oil. Indian state refiners including Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are also reviewing their Russian oil trade documents to ensure no supply will be coming directly from Rosneft and Lukoil after the U.S. sanctioned the oil companies.
Trade sources said Chinese state oil majors have suspended purchases of seaborne Russian oil after the United States imposed sanctions on Rosneft and Lukoil. Chinese national oil companies PetroChina, Sinopec, CNOOC and Zhenhua Oil will refrain from dealing in seaborne Russian oil at least in the short-term due to concern over sanctions.
White House spokeswoman, Karoline Leavitt said a meeting between U.S. President Donald Trump and Russian President Vladimir Putin is not completely off the table. On Wednesday, U.S. President Donald Trump said he canceled a planned summit with Russian President Vladimir Putin, citing a lack of progress in diplomatic efforts and a sense that the timing was off. President Trump expressed frustration with the stalled negotiations.
The Trump administration announced a series of steps to open up Alaskan wilderness to energy and infrastructure development, including by resuming oil and gas leasing in the remote Arctic National Wildlife Refuge.
Early Market Call – as of 8:35 AM EDT
WTI – Dec $62.09, up 35 cents
RBOB – Nov $1.9282, up 17 points
HO – Nov $2.3983, up 1.5 cents
