Oil prices experienced a rebound on Monday, driven by new U.S. sanctions on Iran and Iraq’s commitment to adhere to OPEC+ production agreements, which heightened concerns about near-term supply tightness.
Key Highlights:
Price Movements:
Brent crude futures increased by 35 cents (0.5%) to settle at $74.78 a barrel.
U.S. West Texas Intermediate (WTI) crude rose by 30 cents (0.4%) to $70.70.
Market Context:
On Friday, Brent recorded its lowest close since February 6, while WTI hit its lowest settlement of the year.
The recent increase in prices comes after a significant sell-off attributed to expectations of resumed northern Iraqi oil exports and potential resolutions to the Ukraine conflict.
U.S. Sanctions on Iran:
The U.S. Treasury imposed new sanctions targeting Iran’s oil sector, affecting brokers, tanker operators, and shippers involved in the sale and transport of Iranian petroleum.
UBS analyst Giovanni Staunovo noted that while these sanctions may have a modest impact on prices, Iranian crude oil exports remain high, and the long-term effects of the sanctions are uncertain.
Iraq’s Commitment:
Iraq’s oil ministry reiterated its commitment to compensate for any overproduction relative to its OPEC+ quotas. It announced plans to resume exports of 185,000 barrels per day from Kurdistan through the Iraq-Turkey pipeline.
Market Dynamics:
The market structure indicates signs of near-term supply tightness, with the premium of front-month Brent futures over the next month’s contract reaching its highest level since February 11.
Analysts suggest that while the market is recovering from previous losses, ongoing discussions around the Ukraine war and potential increases in Russian oil supply could keep prices under pressure.
Political Context:
U.S. President Donald Trump mentioned that the U.S. is nearing a minerals deal with Ukraine and discussed tariffs against Canada and Mexico, which could affect economic activity and oil demand.