Oil prices rose to a near three-week high in Asian trade on Friday, as fresh U.S. sanctions against Iran and plans to cut production by the OPEC+ pointed to tighter supplies in the coming months.
Crude prices were set for a second straight week of gains, as they recovered further from more than three-year lows struck earlier in March. Oil was wallopped by fears of slowing demand and rising supplies.
But crude prices were also supported in recent sessions by increased optimism over top importer China, as Beijing outlined plans for more stimulus measures.
Brent oil futures expiring in May rose 0.6% to $72.46 a barrel, while West Texas Intermediate crude futures rose 0.7% to $68.16 a barrel by 21:17 ET (01:17 GMT). Both contracts were at their highest levels since early-March, and were set to add between 1.7% and 3% this week.
US hits Iran with new sanctions, targets Chinese refinery
The U.S. on Thursday issued new sanctions against Iran and related entities on Thursday, targeting an independent Chinese refinery and the vessels that supply crude to such facilities.
The move was Washington’s latest round of restrictions on Iran, after President Donald Trump said in February that he will reimpose a “maximum pressure” campaign against Iran with a goal of driving down the country’s exports to zero.
Trump’s main goal is to deter Tehran from developing a nuclear weapon. Several oil tankers- which Washington claims are a part of Iran’s “shadow fleet” of vessels were targeted in the new sanctions, as was a Chinese refinery.
China does not recognize U.S. sanctions against Iran, and is the biggest buyer of oil from the country.
OPEC+ plans output cuts
The Organization of Petroleum Exporting Countries and allies said on Thursday that seven of its member states will cut output to make up for recent production increases.
The plan will entail monthly cuts of between 189,000 and 435,000 barrels per day, and will last until June 2026.
The new cuts- which will see reduced production chiefly in Iraq and Saudi Arabia, will largely offset a recent decision to increase production. Kazakhstan was seen producing well above OPEC+ mandates in recent months.
The OPEC+’s production cuts, coupled with tighter sanctions against Iran, supported oil prices with the prospect of lower supplies in the coming months.
Oil was also sitting on strong gains from earlier in the week, as traders attached a greater risk premium to crude following the collapse of the Israel-Hamas ceasefire.
Source: Investing