Oil prices rose on Thursday, driven by renewed fears of supply disruptions after Washington imposed additional sanctions on Iranian oil exports. This development came amid geopolitical tensions, with markets reacting to various indicators, most notably the US’s tough stance on Tehran, OPEC actions, and US inventory figures.
At 9:00 a.m. EST, Brent crude for June delivery rose 1.3% to $66.69 per barrel. West Texas Intermediate crude rose 1.5% to $63.40. Both crudes appeared to be on track for their first weekly gain in three weeks, having reached their highest levels in two weeks. This coincided with the last trading day of the week before the Easter holiday.
US Sanctions Spark Markets
The Trump administration has imposed new sanctions on Iran’s oil sector, leading to a sharp rise in prices. The sanctions targeted Chinese “teapot” refineries, small, independent refineries that buy Iranian crude at low prices. The measures also targeted entities, vessels, and companies facilitating the transport of Iranian crude, as part of a “maximum pressure” campaign to completely halt Iran’s oil exports.
Meanwhile, the United States and Iran are conducting sensitive nuclear talks. A round of negotiations was held in Oman and is expected to resume soon in Rome, Italy. These talks directly impact markets, as they could lead to sanctions relief or further escalation.
The US Treasury Department stated that the new measures aim to cut off funding for Iran’s nuclear activities and deprive Tehran of oil revenues. It added that Iran continues to use a fleet of shadow tankers to smuggle oil.
OPEC Actions and Supply Forecasts
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) announced that it had received new plans from Iraq and Kazakhstan to cut production. These cuts are intended to compensate for previous quota overruns in recent months. However, full compliance remains uncertain.
US Stocks: Mixed Signals
Analyst Livia Gallaratti of Energy Aspects said that some countries are facing difficulties in implementing the cuts. She noted that the market is not seeing actual commitment from all members, creating uncertainty about the supply and demand balance. However, she added that simply announcing an intention could give prices a short-term boost.
On the inventory front, the US Energy Information Administration announced that crude oil inventories increased by 515,000 barrels in the week ending April 11. This increase exceeded analysts’ expectations of a 507,000-barrel increase.
However, gasoline inventories fell by 2 million barrels, to 234 million barrels. Distillate inventories—which include diesel and heating oil—declined by 1.9 million barrels, to 109.2 million, their lowest level since November 2023.
This data suggests that the US market is experiencing a glut of crude oil, but with strong demand for refined products. This discrepancy is confusing investors looking for clearer signals about the market’s direction. Oil prices continued to rise on Thursday, supported by new signs of tightening supply.
A number of OPEC producers, particularly Iraq and Kazakhstan, pledged to implement additional production cuts in the coming months. They made this move to compensate for the excess production they previously pumped, which went beyond the agreed-upon quotas within the OPEC+ alliance. These commitments reflect the desire of producing countries to support market stability and maintain a balance between supply and demand.
These cuts are expected to gradually reduce global supply, increasing pressure on markets amid relatively strong demand. Markets welcomed these moves, as investors are counting on actual implementation of the pledges, amid persistent doubts about the extent of compliance within OPEC+. These developments come as geopolitical and trade factors continue to influence short-term price trends.
Statements supporting prices
UBS analyst Giovanni Staunovo said that the recent US sanctions directly impact the global supply equation. He added that the Treasury Department’s hawkish tone is increasing fears of a supply shortage, prompting investors to hedge their buying.
In the same context, observers explained that markets are not only focused on the sanctions, but are also looking at future expectations. The complex political situation between Washington and Tehran does not bode well for a quick resolution, which supports price stability at high levels.
Pressures from Global Trade
In parallel with geopolitical issues, markets are experiencing increasing pressure due to trade tensions. The United States imposed new tariffs on a number of imports, and some countries responded with similar measures. This escalation has disrupted global trade and led to lower expectations for oil demand growth. The International Energy Agency and OPEC, along with financial institutions such as Goldman Sachs and JPMorgan, have lowered their forecasts for demand growth and oil prices through 2025. These forecasts are based on weak consumption in Asia and Europe, rising transportation costs, and disruptions to global supply chains.
Market Outlook
So far, markets continue to find a balance between opposing factors. On the one hand, sanctions and geopolitical concerns are encouraging higher prices. On other hand, fears of a global economic recession are limiting ample demand.
With the summer driving season approaching in the United States, fuel consumption is expected to increase, which could support prices in the short term. However, any developments in the nuclear talks with Iran, or new decisions by OPEC, could abruptly change the market’s trajectory.
Energy Aspects expects Brent crude to remain between $65 and $72 in the second quarter, barring unexpected shocks. Livia Gallaratti says that markets will remain highly sensitive to political and economic data, especially given the current situation.
