Oil futures: Crude higher as Russia flags ‘consequences’ over tank support

26 Jan 2023

Quantum Commodity Intelligence – Crude oil futures Thursday were higher following the latest EIA data revealing a smaller-than-expected rise in crude stocks, while increased rhetoric from Russia raised the geopolitical stakes.   

March ICE Brent futures were trading at $87.34/b (1825 GMT), compared to the day’s high of $88.01/b and Wednesday’s settle of $86.12/b.

At the same time Mar23 NYMEX WTI was trading $81.19/b, versus Wednesday’s settle of $80.15/b.  

“Crude prices are rising after the stockpiles posted a modest gain and a decent improvement with demand. ​The EIA crude oil inventory report showed that demand for crude oil and gasoline improved, while distillates softened,” said Ed Moya, senior market analyst at brokerage Oanda.

“Lately, it seems this oil market has a tendency to lean towards a bullish spin after any major oil event.​ WTI crude should find resistance ahead of the $83.50 level, but if that does not hold, we could see a mini breakout,” added Moya.

Geopolitical tensions ratcheted up after the Biden administration said Wednesday it will equip Ukraine with the Abrams tank, a key reversal in the West’s effort to arm Kyiv as it prepares for a fresh Russian offensive.

This came after Germany agreed to send Leopard 2 tanks to Ukraine, in what Kyiv hopes will be a game-changer on the battlefield.

However, the announcements have provoked a fierce backlash from Moscow.

Head of Russia’s delegation to the Vienna talks on military security and arms control Konstantin Gavrilov has called on the West to prevent "nuclear provocations" with German-made Leopard 2 tanks.

"We warn the Western sponsors of the Kiev military machine against encouraging nuclear provocations and blackmail,” said Gavrilov.

In case such munitions for NATO-made heavy weapons are supplied to Kiev, we will consider that as the use of dirty nuclear bombs against Russia with all the consequences that come with it," he said at the OSCE forum on security cooperation, as reported by the Kremlin-controlled TASS news agency.

On the macro front, a Reuters poll of economists found global growth is forecast to barely move above 2% in 2023, with consensus pivoting towards a further downgrade.

The slump in container rates and a fresh two-and-a-half-year low for the Baltic Index also weighed on sentiment for a trade-led economic recovery in 2023.