Oil prices rose on Thursday due to tighter supply expectations after Washington imposed additional sanctions on Iranian oil trade.
Additionally, some Organization of the Petroleum Exporting Countries producers also pledged more output cuts to offset overproduction through June 2026.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $63.68 per barrel, up 1.4%.
Brent crude oil on the Intercontinental Exchange was at $66.61 a barrel, up 1.2% from the previous close.
Wednesday saw both benchmarks close 2% higher, reaching their highest levels since April 3.
This puts them on track for their first weekly increase in three weeks.
As Thursday marks the final settlement day of the week due to the upcoming Good Friday and Easter holidays, investors are keeping a close watch.
Sanctions on Iran
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The Trump administration revealed new sanctions on Wednesday targeting Iran’s oil exports, with measures against a China-based “teapot” refinery also included.
“The move aims to ramp up pressure on Tehran amid heightened tensions over its nuclear program,” FXstreet said in a report.
The US Treasury Department issued a statement that US President Donald Trump’s sanctions aim to reduce Iran’s oil exports to zero.
The sanctions are meant to deter Chinese imports of Iranian oil as part of Trump’s “maximum pressure” campaign.
China has been the largest importer of Iranian oil over the last couple of years.
Imports
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Moreover, data from the customs authority showed that China’s overall crude oil imports increased to 12.1 million barrels per day in March.
This figure was approximately 1.7 million barrels per day higher than imports in January and February, and it was almost 5% higher than imports in the previous year.
Carsten Fritsch, commodity analyst at Commerzbank AG, said:
A sharp rise in oil imports from Iran is being held responsible for this, even though China does not publish any official data in this regard.
Vortexa, the shiptracking agency, reports that seaborne oil imports have seen a significant rise, primarily fueled by record-high shipments from Iran to Shandong province.
Independent Chinese refineries are suspected of having imported oil from Iran in the run-up to the stricter US sanctions.
Trump’s sanctions against Iran come at a time when trade tensions between the US and China are boiling.
Experts believe that Trump’s sanctions have been placed to pile on more misery for China’s economy.
Less availability of cheaper Iranian barrels in the market would increase competitiveness of oil coming from the Middle East and Russia in the coming weeks. China is the world’s largest importer of crude oil.
OPEC compensation plans
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Adding to concerns about supply, Wednesday’s output cut compensation plan by OPEC+ further supported oil prices.
OPEC announced on Wednesday that it has received revised plans from member countries Iraq and Kazakhstan, as well as other nations within the alliance, detailing their strategies to implement additional oil output cuts.
The updated OPEC compensation plan increases monthly production cuts, now ranging from 196,000 barrels per day to 520,000 barrels a day, effective from this month until June 2026, the cartel said in an official release.
The previous plan had lower cuts, ranging from 189,000 barrels per day to 435,000 barrels a day.
The planned output cuts mean that the cartel’s decision to raise production by 411,000 barrels per day in May would be largely nullified.
Eight members of the OPEC+ alliance, in a surprising move earlier this month, agreed to raise crude oil production by 411,000 barrels a day in May. This weighed on sentiments, and oil prices slipped as a result.
The cartel is scheduled to start unwinding its voluntary production cuts of 2.2 million barrels per day from April by increasing output by 135,000 barrels a day.
The market was expecting a similar rise in May as well.
Gains may not hold
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The rise in oil prices this week may not hold as global demand is likely to be negatively affected due to the ongoing trade tensions.
The International Energy Agency this week lowered its forecasts for growth in global oil demand sharply for 2025, citing concerns about US tariffs.
OPEC in its monthly report also cut 2025 demand forecasts for the first time since December. Though, it was only a slight downward revision compared to IEA.
“If we see a long-lasting trade war through 2025, Rystad Energy projects a 15% reduction in 2025 global GDP growth – from 2.8% to 2.4% – which would lower our oil demand growth forecast from 1.1 million barrels per day (bpd) to 600,000 bpd – an almost 50% decrease,” said Janiv Shah, vice president, commodity markets analysis, oil, at Rystad Energy.
However, we expect supply corrections and disruptions, along with rising energy demand in the northern hemisphere summer, to keep Brent prices around $70 per barrel.
