US crude and gasoline inventories increased last week, narrowing deficits to seasonal norms and raising concerns of a looming oversupply. However, the risk of tougher Russian Oil sanctions could support prices and prevent a sharp decline, Commerzbank's commodity analyst Barbara Lambrecht notes.

US Oil stocks rise amid oversupply concerns

"There's a looming oversupply in the Oil market. Up until now, weekly US inventory reports have not indicated clear evidence of such an oversupply though. However, last week's report slightly clouds the picture: US crude Oil inventories rose by 1.7 million barrels compared to the previous week, and the deficit to the seasonal norm has narrowed to 4.2%."

"Gasoline inventories in the US also saw a sharp increase and are now close to reaching the five-year average. Additionally, the gap between current distillate inventories and the five-year seasonal average has also diminished thanks to a slight increase in stockpiles. If these trends continue, prices may decline further."

"However, the risk of tougher sanctions on Russian Oil poses a counterweight to any sharp price drops. This risk was reportedly discussed again at the G7 finance ministers' meeting yesterday."