Crude oil and gasoline prices experienced a mixed trading session on Wednesday, with West Texas Intermediate (WTI) crude falling -1.14% and February RBOB gasoline down -0.061%. Several factors contributed to the market’s volatility, including shifts in US sanctions policy, geopolitical tensions, inventory data, and OPEC+ production decisions. The market displays a complex interplay of supply, demand, and geopolitical influences.
Significant shifts in US sanctions policy and Venezuelan crude exports were a key driver of price fluctuations. The US government’s decision to lift some sanctions on Venezuelan crude exports, allowing the shipment of up to 50 million barrels of “high-quality sanctioned oil” to the United States, boosted confidence in the ability to increase global oil supply. This move, coupled with Venezuela’s status as the twelfth-largest crude producer in OPEC, provided a potential counterweight to concerns about supply tightening. The US Energy Department’s announcement of selectively rolling back sanctions, aimed at facilitating the transport and sale of Venezuelan crude and oil products, further underscored this potential.
Mixed inventory data and demand concerns were also a factor. The weekly report from the U.S. Energy Information Administration (EIA) presented a mixed picture for US inventories. While crude oil inventories experienced a draw of -3.83 million barrels, exceeding expectations, gasoline and distillate stockpiles continued to build, rising by +7.7 million barrels and +5.59 million barrels respectively. These substantial increases in gasoline and distillate inventories, reaching 10-month and 1-year highs, signaled a significant drop in US gasoline demand, which tumbled to a 1-year low of 8.17 million barrels per day. The EIA’s data also revealed that US crude oil inventories were -4.1% below the seasonal 5-year average, while gasoline inventories were +1.6% above the average, and distillate inventories were -3.1% below the 5-year benchmark.
OPEC+’s decision to maintain its production pause in Q1 2026, following a previous agreement to raise output by +137,000 barrels per day in December, provided support for prices. However, ongoing geopolitical tensions, including drone and missile attacks on Russian refineries and tankers in the Baltic Sea, continued to limit Russia’s export capabilities and contribute to global supply constraints. Furthermore, Saudi Arabia’s reduction in February Arab Light crude prices, for a third month running, reflected concerns about demand and signaled a willingness to increase supply. The EIA’s upward revision of 2025 US crude production estimates to 13.59 million barrels per day, and the ongoing rise in the number of active US oil rigs – up 3 rigs to 412 – indicated a possible shift toward increased US production.
Market forecasts and outlook highlighted concerns about oversupply. Morgan Stanley’s downward revision of crude price forecasts, predicting a global oil market surplus expanding to a peak mid-year, focused on this concern. The bank lowered its Q1 and Q2 forecasts to $57.50/bbl and $55/bbl respectively. Vortexa reported a -3.4% week-on-week fall in crude oil stored on tankers to 119.35 million bbl, and Kpler data indicated a 10% m/m increase in China’s crude imports in December to a record 12.2 million bpd, suggesting rising demand from the world’s largest importer. These factors combined to create a complex outlook, with significant uncertainty surrounding global oil market dynamics.
