Oil prices settled more than $1 higher on Wednesday after the European Union agreed to an additional round of sanctions threatening Russian oil flows that could tighten global crude supplies.

Brent crude futures settled up US$1.33, or 1.84%, to US$73.52 a barrel. US West Texas Intermediate crude futures rose US$1.70, or 2.48%, to US$70.29. European Union ambassadors agreed on Wednesday to a 15th package of sanctions on Russia over its war against Ukraine, the Hungarian EU presidency said.

"I welcome the adoption of our 15th package of sanctions, targeting in particular Russia's shadow fleet", European Commission President Ursula von der Leyen said on X.

The "shadow fleet" has aided Russia in bypassing the US$60 per barrel price cap imposed by the G7 on Russian seaborne crude oil in 2022, and has helped keep Russian oil flowing.

"The renewed seriousness about clamping down on flows here is potentially supportive, and is offsetting the traditional demand metric that we have been focusing on," said John Kilduff, partner at Again Capital in New York.

Curbing price gains on Wednesday, gasoline and distillate inventories rose by more than expected last week, according to data from the Energy Information Administration, weighing on crude prices.

Meanwhile, producers' group OPEC cut its forecasts for demand growth in 2024 and 2025 for the fifth straight month on Wednesday and by the largest amount yet.

"OPEC are squaring up to reality about what they are facing, the (demand growth forecast) cuts highlight that they have their hands full in terms of trying to balance this market heading into 2025," Again Capital's Kilduff added.

OPEC+, which groups members of the Organization of the Petroleum Exporting Countries with other producers such as Russia, earlier this month delayed plans to start raising output. Weak demand, particularly in top importer China, and non-OPEC+ supply growth were two factors behind the move.

China said on Monday it would adopt an "appropriately loose" monetary policy in 2025 marking the first easing of its stance in 14 years.

"We believe Chinese monetary and fiscal stimulus will be key data points to watch for the coming year," Zhu added.

Chinese crude imports also grew annually for the first time in seven months in November, up more than 14% from a year earlier. Meanwhile, the Kremlin said that reports of a possible tightening of US sanctions on Russian oil suggested the administration of US President Joe Biden wants to leave a difficult legacy for US-Russia relations.

Treasury Secretary Janet Yellen said on Wednesday that the US is continuing to look for creative ways to reduce Russia's oil revenue and lower global demand for oil create an opportunity for more sanctions.