Oil prices extended gains on Thursday on the prospect of tighter supply after Washington imposed further sanctions to curb Iranian oil trade and as some OPEC producers pledged further output cuts to compensate for pumping above agreed quotas.
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Oil prices rose more than 3% on Thursday after the United States imposed new sanctions to curb Iranian oil exports, elevating supply concerns.
Brent crude futures rose $2.11, or 3.2%, to close at $67.96 a barrel, and U.S. West Texas Intermediate crude settled at $64.68 a barrel, up $2.21, or 3.54%.
Both benchmarks booked their first weekly rise in three, gaining about 5%. Thursday is the last settlement day of the week ahead of the Easter holidays.
The new sanctions on Iranian oil exports and hawkish comments on the issue from the U.S. Treasury are increasing supply concerns and helping support crude, said UBS analyst Giovanni Staunovo.
The sanctions issued by President Donald Trump’s administration on Wednesday, including against a China-based “teapot” oil refinery, ramp up pressure on Tehran amid talks on the country’s escalating nuclear program.
Adding to supply concerns, the Organization of the Petroleum Exporting Countries (OPEC) said on Wednesday it had received updated plans for Iraq, Kazakhstan and other countries to make further output cuts to compensate for pumping above quotas.
“The rally has a couple of factors behind it – short-covering, the weaker U.S. dollar, which makes crude oil cheaper to buy, and the U.S. pressure on Iran,” IG market analyst Tony Sycamore said.
“If we assume that U.S. growth is going to be flat at best for the next two quarters and Chinese GDP is set to slow to somewhere between the 3%-4% band, it’s not good for crude oil,” Sycamore said.
U.S. crude stocks rose while gasoline and distillate inventories fell last week, the Energy Information Administration said on Wednesday.
OPEC, the International Energy Agency and several banks, including Goldman Sachs and JPMorgan, cut forecasts on oil prices and demand growth this week as U.S. tariffs and retaliation from other countries threw global trade into disarray.
