US Sanctions on Iran and OPEC Cuts Drive Oil Prices Higher for the Week

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Oil prices continued to rise on Thursday due to tighter supply expectations, driven by new U.S. sanctions on Iranian oil exports and additional output cuts from some OPEC members. Brent crude futures increased by 34 cents, or 0.5%, to $66.19 a barrel, while U.S. West Texas Intermediate crude gained 44 cents, or 0.7%, reaching $62.91 a barrel. Both benchmarks settled 2% higher on Wednesday, marking their highest levels since April 3, and are set for their first weekly increase in three.

The U.S. administration announced new sanctions targeting Iran's oil exports, including restrictions on a China-based oil refinery, as part of heightened pressure on Tehran amidst nuclear talks. Meanwhile, OPEC confirmed that countries like Iraq and Kazakhstan had updated their plans to cut output further, compensating for exceeding their production quotas.

"These factors likely influenced market sentiment," said Michael McCarthy, CEO of Moomoo. He noted that while Iranian production isn't a major factor, and OPEC frequently exceeds quotas, the combination of these issues contributed to a more bullish outlook.

Additional support for oil prices came from significant draws in U.S. gasoline and distillate stocks, as well as a smaller-than-expected increase in crude inventories. McCarthy explained that recent concerns about a potential surge in U.S. oil exports were easing, with a decline in refining activity suggesting emerging bottlenecks in supply.

However, despite these factors, several organizations, including OPEC, the International Energy Agency, and banks like Goldman Sachs and JP Morgan, lowered their oil price and demand growth forecasts this week due to global trade disruptions caused by U.S. tariffs and retaliatory measures from other countries. The World Trade Organization also revised its global trade growth forecast down to a 0.2% contraction this year, down from its previous prediction of 3.0% growth.

Paraphrasing text from "Reuters" all rights reserved by the original author