Oil prices cool slightly with focus on sanctions, US inventories

SINGAPORE: Oil prices slipped in early trade on Tuesday, easing slightly after a strong rally a day earlier, as investors weighed fresh risks from the conflict between Russia and Ukraine and its possible impact on global fuel supplies.

Brent crude was down by 16 cents, or 0.23 percent, to $68.64 per barrel at 0005 GMT. US benchmark West Texas Intermediate (WTI) crude dropped 16 cents to $64.64.

Both benchmarks had surged nearly 2 percent on Monday, with WTI rising above its 100-day moving average, marking the highest levels seen in more than two weeks. Analysts said that while prices cooled slightly on Tuesday, the market remained vulnerable to further gains.

Market driven by war tensions

The rally earlier this week was fuelled by fears of fresh supply disruptions after Ukraine targeted Russian energy facilities. These strikes disrupted Moscow’s oil processing and export systems and reportedly caused gasoline shortages in parts of Russia. The attacks were seen as retaliation for Russia’s advances on the battlefield and its ongoing strikes on Ukraine’s gas and power infrastructure.

Analysts at IG noted that crude prices could climb further if WTI manages to hold above the $64 to $65 resistance range. Barclays, in a note to clients, said the oil market remains tightly balanced, caught between geopolitical volatility and relatively resilient demand.

Eyes on Washington and US inventories

Political signals from Washington also added to market uncertainty. US President Donald Trump reiterated on Monday that Russia could face more sanctions unless progress is made towards a peace deal within two weeks. The threat of additional restrictions on Moscow’s oil exports has kept traders on edge.

At the same time, attention is shifting to fresh inventory data from the American Petroleum Institute (API). Early forecasts suggest a drawdown in US crude and gasoline stocks but a possible rise in distillates, which could influence short-term price direction.

With the war dragging on and diplomatic efforts stalled, traders remain wary. For now, oil is moving in a narrow but tense range, with every headline from the conflict holding the power to shake the market.