ANS crosses above $75
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Big US inventory drawdown, supply risks overcome recession worries
Steve Sutherlin Petroleum News
Alaska North Slope crude added 52 cents March 26 to close at $75.72 per barrel, notching its third consecutive day above the $75 mark, a level unseen since the Alaska benchmark closed at $75.60 Feb. 20. WTI added 65 cents on the day to close at $69.65 and Brent gained 77 cents to close at $73.79.
After Feb. 20, markets were gripped by recessionary fears. ANS slumped as low as $68.95 on March 5.
WTI and Brent fell even lower over the period, but ANS has gained a relative advantage in mid-March reports of a surprise March boost in Chinese crude demand due to financial stimulus from the Chinese government, which heightened demand for Pacific crude cargoes.
On March 26, ANS enjoyed a $6.07 premium over WTI, and a $1.93 premium over Brent.
Another persistent bearish factor has been a strong U.S. dollar, which has made oil more expensive for buyers that must convert local currencies to buy crude, which is priced in dollars.
The dollar is not likely to go much higher and may in fact be poised for a fall according to some analysts.
"With the exception of the Swiss Franc and Icelandic Krona, the U.S. dollar is unusually strong," Werner Antweiler, professor at the University of British Columbia's Sauder School of Business told MarketWatch columnist Brett Arends for a March 26 article. "This means that U.S. exports are relatively more expensive compared to goods produced elsewhere, and it also means that U.S. imports are particularly cheap ... The U.S. dollar is currently going through a phase of broad over-valuation."
A surprise inventory drawdown On March 26, crude prices were bolstered by a surprise drawdown of U.S. crude supplies, according to data released the same day by the U.S. Energy Information Administration.
U.S. commercial crude oil inventories -- not including the Strategic Petroleum Reserve -- for the week ended March 21 plunged 3.3 million barrels from the previous week to 433.6 million barrels -- 5% below the five-year average for the time of year, the EIA said.
Crude stocks were forecast to have increased by 1 million barrels, according to a Wall Street Journal survey of analysts.
Total motor gasoline inventories fell over the week by 1.4 million barrels to 239.1 million barrels -- 2% above the five-year average for the time of year, the EIA said. Distillate fuel inventories decreased by 0.4 million barrels to 114.4 million barrels -- 7% under the five-year average for the time of year.
Crude found additional support on an escalation of Middle East hostilities which could affect supplies from the region, and by Russia slow-pedaling implementation of ceasefires in the Russia/Ukraine conflict.
ANS inched 5 cents higher March 25 to close at $75.21, while WTI shed 11 cents to close at $69.00 and Brent edged up by 2 cents to close at $73.02.
Crude prices on March 24 responded positively after President Trump announced a 25% secondary tariff on countries that buy oil and gas from Venezuela, effective April 2.
ANS jumped 85 cents to close at $75.16, WTI jumped 83 cents to close at $69.11 and Brent jumped 84 cents to close at $73.00.
On March 21, ANS fell 9 cents to close at $74.31, WTI added 2 cents to close at $68.28 and Brent gained 16 cents to close at $72.16.
On March 20, crude gained as the U.S. Treasury Department's Office of Foreign Assets Control sanctioned a China oil refinery and 19 entities and vessels tied to shipping Iranian crude, according to a March 26 Barchart report. Iran is feeling pressure on its crude exports after President Trump sent a letter to Iran's Supreme Leader Ali Khamenei that said Iran has a two-month deadline to reach a new nuclear deal.
ANS leapt $1.22 March 20 to close at $74.40, while WTI leapt $1.10 to close at $68.28 and Brent leapt $1.22 to close at $72.00.
From Wednesday to Wednesday, ANS gained $2.54 from its March 19 close of $73.18 to its close of $75.72 March 26.
Russian oil under Ukraine peace deal The lifting of sanctions on Russia will only marginally add to new oil supply but potentially would deliver billions of dollars of revenues immediately to the Russian industry -- and in time, boost upstream investment, according to Wood Mackenzie analysts.
"Russia's liquids production has barely missed a beat," Simon Flowers, Wood Mackenzie chief analyst wrote in the Edge March 26. Russian output averaged 10.85 million barrels per day in 2024, just 4% lower than the invasion year of 2022 when it reached 11.28 million bpd.
"The modest reduction essentially reflects Russia's compliance with its OPEC+ obligations," Flowers said. But sanctions have forced barrels from traditional export markets in Europe and the United States to more distant refiners in Asia.
Russian exporters could gain substantial economic value from the lifting of sanctions, he said, adding that freight to India is more expensive and there's been a loss of value from the G7's $60 per barrel price ceiling imposed in December 2022.
The combined effect is that the waterborne value of Urals exports delivered to the Indian sub-continent are reported to be $15 to $20 a barrel below Brent, compared to levels of $2 to $4 pre-2022 that primarily reflected quality differences, he said.
Russian oil producers could see a revenue uplift worth $6 billion per year on Wood Mackenzie's calculations if sanctions are lifted, Flowers said, due to the narrowing of the discount to Brent -- equivalent to a 10% increase in export volumes.
"Lifting sanctions on Russia won't add to supply and the fundamentals will remain unchanged, though it would remove one of the sources of geopolitical tension supporting price," he said.
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