Oil Prices Fluctuate Amid Sanctions and Tariffs as Domestic Markets Show Resilience

Recent developments have led to significant fluctuations in oil prices, heavily influenced by sanctions and tariffs that create uncertainty in trade flows. As of February 10, 2025, the weekly oil price trends indicate a downward shift, with domestic prices remaining notably stronger than international ones. The WTI March contract closed at $71 per barrel, down 3.73%, while the Brent April contract settled at $74.66, a decline of 2.37%. Meanwhile, domestic prices, represented by the SC2503 contract, closed at 607.2 yuan per barrel, showing a slight increase of 0.23%.

The tightening sanctions on Russia and Iran have led to a substantial rise in spot prices in the Middle East. The U.S. administration has reinstated its "maximum pressure" campaign against Iran, aiming to reduce its oil exports to zero. This has boosted sentiment in the Middle Eastern crude oil market, with many buyers now seeking immediate shipments from countries like Saudi Arabia and postponing further purchases. Moreover, Saudi Aramco raised the official selling price of Arab light crude destined for Asia by $2.40 per barrel, exceeding previous market expectations.

The imposition of 10% tariffs on U.S. crude oil imports by China in response to U.S. tariffs creates further complexity. Although Sinopec, which largely imports U.S. light sweet crude, can adapt due to its diverse supply sources, the uncertainty surrounding energy imports may lead to increased domestic pricing for SC contracts. As a result, a trend of domestic prices being stronger than international prices is anticipated.

In terms of inventory, recent EIA data shows that U.S. crude oil inventories rose to 821.855 million barrels, marking an increase of 8.914 million barrels from the previous week. This includes strategic reserves, with commercial crude stocks rising by 8.663 million barrels. Despite a year-on-year decrease, the overall inventory situation remains pressured.

Domestic refining rates have significantly dropped, with Shandong's crude processing rates falling to 43.64%, the lowest since April 2020. The anticipated decrease in crude prices post-holiday could lead to a reduction in retail prices, but as gasoline demand rebounds after the Spring Festival, the market remains cautiously optimistic about recovery.

The combination of external sanctions and domestic supply dynamics is creating a complex landscape for oil prices, suggesting potential for continued volatility.