Oil prices surged throughout the week, driven by the EU's expanded sanctions on Russia and reports of a Ukrainian strike on a Caspian Pipeline Consortium (CPC) oil pumping station. But just as momentum seemed set to hold, the market took a sharp turn on Friday, wiping out all gains and dragging prices below $75.
Brent crude, which closed the previous week at $74.40, rose on Monday following reports that Ukraine had attacked a CPC station carrying Kazakhstani oil in a "reaction to the US." The attack pushed Brent to $75.12 before it finished the day at $75.06, up 0.07%. West Texas Intermediate (WTI) rose 1% to $71.28.
Economic recovery expectations in China, the world’s largest oil importer, were fueled by comments from Chinese President Xi Jinping supporting the private sector. As a result, Brent oil gained 0.5% to $75.45 on February 18, while WTI rose 0.6% to $71.74.
Following the EU's approval of a new sanctions package targeting Russia's "shadow fleet," used to transport oil and circumvent sanctions, Brent crude reached $76.46 on February 19. It closed the day at $75.81, up 0.5%, while WTI gained 0.6%, closing at $72.16.
Brent continued its upward movement on Thursday, rising 4% to $76.12, with WTI also climbing nearly 4% to $72.43. However, the upward momentum was curbed later that day when US Treasury Secretary Scott Bessent signaled that easing sanctions against Russia could be considered as part of efforts to achieve peace in the Ukraine-Russia conflict.
On Friday, news of a phone call between Bessent and He Lifeng, Chinese vice premier, in which both sides stressed the importance of US-China economic relations, eased concerns about potential supply disruptions. As a result, Brent oil reversed its gains, falling nearly 3% and marking its sharpest decline since October 2024.
Brent crude ended the week starting February 17 with a 0.7% decline, closing at $73.90, continuing its five-week downward trend. WTI also dropped 0.5%, closing at $70.20.
- "Prices have remained within a tight range of $74 to $76 per barrel."
“Considering the significant geopolitical uncertainty, oil prices have remained within a tight range of $74 to $76 per barrel, with little volatility,” Kate Dourian, a non-resident fellow at the Arab Gulf States Institute in Washington, told Anadolu.
Dourian noted that investors might choose to monitor the situation rather than take aggressive positions while awaiting news of potential new sanctions from Washington and Russia-US peace talks. She added that if an agreement were reached to end the Russia-Ukraine war and sanctions against Moscow were eased, oil prices could fall further.
“However, it is worth noting that even if sanctions against Russia were eased, OPEC+ restrictions would cap any price increases,” Dourian said.
“The impact would not be immediate, as it would take time for buyers to resume purchasing Russian oil, given that they have secured alternative sources after the previous Biden administration imposed sanctions on tankers carrying Russian and Iranian oil in violation of sanctions,” she added.
- Market uncertainty prevails
According to Julien Mathonniere, an oil market economist at the London-based Energy Intelligence Group, this week’s price increases were driven by the uncertainty in the markets.
Noting that one of these uncertainties is whether oil exports from the Iraqi Kurdish Regional Government will resume, Mathonniere said that Ankara is unlikely to give the green light for resuming oil pumping to Ceyhan until there is a resolution regarding its $1.5 billion arbitration case loss with the federal Iraqi government.
Meanwhile, Mathonniere marked that the possibility of the Trump administration intensifying sanctions on Iranian oil is being questioned. While some analysts suggest that Iranian supply could decrease by 200,000 to 300,000 barrels per day, he pointed out skepticism regarding the prospect of tougher enforcement of US sanctions against Iran.
“This market has many pending questions to resolve, and for oil buyers, it is probably too risky to be caught short if prices suddenly spike in response to more disruptive headlines. This is likely why prices have not fallen as much as expected.” Mathonniere said.
- "Prices will drop further"
Osama Rizvi, energy and economy analyst at the US-based market intelligence firm Primary Vision, stated that oil resources in OECD countries are dwindling, the US economy is outperforming expectations, and there could be a recovery in demand from China. However, he noted that there is no significant factor driving the price increases.
“If you look at the traders’ positions, it reflects an opposite sentiment. Hedge funds and other money managers sold 140 million barrels' worth of contracts based on US crude delivered to Cushing, Oklahoma, over the three weeks ending February 11,” Rizvi said.
“I trust that prices will drop further as bearish sentiment takes hold. There is also important economic news this week that will play a role,” he concluded.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr
