Oil Up as Trump Approves New U.S. Sanctions on Russia


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Crude futures rallied Thursday (1/8) on reports that 
U.S. President Donald Trump had approved a bipartisan Senate bill to impose 
sanctions on buyers of Russian oil, helping the market reverse a two-day 
decline.

   The U.S. legislative breakthrough follows months of negotiations and expands 
Washington's campaign to end the Ukraine war by targeting buyers of Russian oil 
such as China, India and Brazil to further restrict the Kremlin's energy 
revenues.

   For the oil market particularly, any form of additional sanction on Russia 
helps alleviate concerns of oversupply amid record production in the U.S., 
Guyana and Brazil, and concerns over President Donald Trump's plans to boost 
Venezuela's output.

   Trump, who has said he will be personally overseeing Venezuela's oil 
administration after the capture of that country's leader Nicolas Maduro by 
U.S. forces over the weekend, suggested in a New York Times interview on 
Wednesday (1/7) that Washington's oversight of Caracas' energy industry could 
last for years. Venezuela produces about 1 million bpd now, according to OPEC, 
far from its heyday of 3.5 million bpd -- which Trump officials said can be 
revived with the help of U.S. industry. Despite potential long-term supply 
additions from Venezuela, near-term sanctions on Russian oil took precedence in 
the day's trading.

   Thursday's rebound in oil futures was also helped by the Energy Information 
Administration's report on Wednesday that U.S. commercial crude stocks declined 
by 3.8 million bbl last week, adding to the prior weekly decline of 1.9 million 
bbl.

   Oil traders will also be watching the December U.S. jobs report due Friday 
(1/9) for clues on whether the Federal Reserve will be prompted to cut interest 
rates for a fourth straight time since September.

   Futures markets currently price in a 90% probability that the Fed will hold 
U.S. rates, now in a range of between 3.5% and 3.75%, unchanged at its January 
28 policy decision. Yet, some economists say the central bank might consider 
another 25-basis point cut this month, like in the prior three rounds, if the 
U.S. unemployment rate hits 4.7%. In November, the jobless rate hit a four-year 
high at 4.6%.

   In Thursday's morning trade, the NYMEX WTI contract for February delivery 
was up by $1.12, or 2%, to $57.11 bbl, virtually recouping all of its losses in 
the prior session.

   ICE Brent for March delivery rose by $1.27, or 2.1%, to $61.23 bbl after 
Wednesday's slide of 1.2%.

   RBOB futures for February climbed by $0.0419 to $1.761 gallon while the 
front-month ULSD for February advanced by $0.0353 to $2.0920.

    




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