Oil rallies, settles at multi-month high on US crude draw, Russia sanctions

Oil prices rose more than 2% on Wednesday, supported by a large draw in US crude stockpiles and potential supply disruptions caused by new US sanctions on Russia, while a Gaza ceasefire deal limited gains.

Brent crude futures settled USD 2.11, or 2.64%, higher at USD 82.03 a barrel, the highest since August 2024. US West Texas Intermediate crude (WTI) settled up USD 2.54, or 3.28%, at USD 80.04 a barrel, the highest since July.

In post settlement trade, Brent rose to the highest since July and WTI gained more than USD 3 a barrel.

US crude oil inventories fell last week to their lowest since 2022, the US Energy Information Administration reported, as exports rose and imports fell. Gasoline and distillate inventories rose more than expected.

“The crude oil draw was largely on import-export dynamics,” said Bob Yawger, director of energy futures at Mizuho. “The exports are hard to believe,” he added, pointing to the fact that many were booked before the sanctions announcement.

The latest round of US sanctions on Russian oil could disrupt Russian oil supply and distribution significantly, the International Energy Agency said in its monthly oil market report.

Jitters over sanctions seem to be supporting prices, said Ole Hansen, head of commodity strategy at Saxo Bank. “Tankers carrying Russian crude seem to be struggling offloading their cargoes around the world, potentially driving some short-term tightness,” he added.

Limiting the gains, Israel and Hamas agreed to a deal to halt fighting in Gaza and exchange Israeli hostages for Palestinian prisoners, according to an official.

Concerns over supply disruption eased with Israel-Hamas ceasefire deal reached, Phil Flynn, analyst at Price Futures Group, said. Investors remained focused on signs of a strengthening economy and oil demand, he added.

The dollar index slipped on Wednesday after US data showed consumer prices rose slightly above expectations in December, heightening expectations for more interest-rate cuts by the Federal Reserve.

A weaker dollar usually supports oil prices and lower interest rates can boost economic growth.

Meanwhile, OPEC expects global oil demand to rise by 1.43 million barrels per day in 2026, maintaining a similar growth rate to 2025, the producer group said.

(Reporting by Nicole Jao, Emily Chow, Jeslyn Lerh, Arunima Kumar, and Enes Tunagur; Editing by David Goodman, Jan Harvey, Diane Craft, Rod Nickel, and David Gregorio)