Market Insights

Oil Surges on New Iran Sanctions, Solid Refining Margins

Amos Simanungkalit · 25 Feb 202527.9K Views

Image Credit: Reuters

Oil prices increased for the second consecutive day on Tuesday as new U.S. sanctions on Iran heightened concerns over potential supply shortages, while strong global refining margins provided additional support.

Brent crude futures gained 15 cents, or 0.2%, reaching $74.93 a barrel by 0724 GMT, while U.S. West Texas Intermediate crude climbed 23 cents, or 0.3%, to $70.93 a barrel. Both contracts saw gains following a $2 drop on Friday.

IG market analyst Tony Sycamore noted that in the short term, oil is seeking a base, with U.S. sanctions on Iran likely to play a role in stabilizing prices. These sanctions target over 30 brokers, tanker operators, and shipping companies involved in transporting Iranian oil. President Donald Trump has emphasized his goal of reducing Iran's crude exports to zero.

Iran, the third-largest producer in OPEC, produced 3.2 million barrels per day in January, according to a Reuters survey.

In the meantime, fuel demand in Western markets continues to support oil prices, with analysts pointing to strong refining margins. Sparta Commodities analyst Neil Crosby highlighted the robust margins for fuel oil and distillates, particularly in the U.S. Gulf Coast and Northwest Europe, driven by heating oil demand from recent cold weather.

Refining margins in Singapore have also improved, averaging $3.50 per barrel in February compared to $2.30 per barrel in January, based on LSEG data.

However, the overall gains were limited by uncertainties surrounding demand and the lack of new economic data from major consumer China. OANDA senior market analyst Kelvin Wong mentioned that clear demand-side factors to drive oil prices higher may not emerge until mid-March, when China is expected to announce new stimulus measures and a growth target for 2025.

Additionally, President Trump confirmed on Monday that tariffs on Canadian and Mexican imports, set to take effect on March 4, are still on track. Analysts believe the tariffs could negatively impact global oil demand growth.