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Oil Prices Rise as U.S. Inventories Drop and Sanctions Tighten Supply

Oil and Gas

Oil Prices Surge as U.S. Inventories Drop & Sanctions Tighten

Business Honor
27 March, 2025

Crude prices surge amid U.S. stockpile declines and geopolitical tensions restricting supply.

Oil prices increased on Wednesday as U.S. crude stocks fell and worries mounted over the tightening of global supply due to U.S. sanctions against Venezuela and Iran.

Brent crude futures added 1.05% to close at $73.79 a barrel, while U.S. West Texas Intermediate (WTI) crude added 0.94% to $69.65 a barrel. Both benchmarks hit session highs, rising more than $1 per barrel.

The price increase came after a report from the U.S. Energy Information Administration (EIA), which indicated a bigger-than-forecast draw in crude stocks. Inventories declined by 3.3 million barrels to 433.6 million barrels last week, beating analysts' forecasts of a 956,000-barrel drop. Refineries that are increasing production helped draw the stocks.

Furthermore, geopolitical threats also accelerated supply worries. On Tuesday, U.S. President Donald Trump threatened to impose 25% tariffs on countries buying Venezuelan oil. This prompted a shutdown of oil transactions between Venezuela and its biggest buyer, China. Barclays analysts cautioned that Venezuela would lose as much as 400,000 barrels a day in exports, which would cost the country $4.9 billion in revenue.

Additional supply disruptions are caused by fresh U.S. sanctions on Iranian oil exports. Washington targeted Chinese refineries, making it harder for Iran to export crude. OPEC+ countries might raise output to offset the possible loss of 1.5 million barrels per day from Iran.

Some market pressure was eased, though, as the U.S. worked to stop attacks on energy infrastructure by mediating a peace agreement between Russia and Ukraine. China and India are expected to shift their purchases from Venezuela to Russia as a result, increasing the country's oil supplies.

Analysts forecast continued price volatility despite geopolitical concerns, with future market stability determined by OPEC+ supply changes.