Oil prices continued their upward momentum on Thursday, bolstered by tightening supply prospects due to new U.S. sanctions on Iranian oil and fresh commitments by some OPEC nations to reduce output. Brent crude climbed by 55 cents, or 0.8%, to reach $66.40 a barrel, while U.S. West Texas Intermediate (WTI) increased 66 cents, or 1.1%, to $63.13 a barrel.
The rally marks a strong week for oil markets, with both benchmarks settling around 2% higher on Wednesday—hitting their highest levels since early April. Thursday was also the last trading day of the week before the Easter holidays, adding to market momentum.
Multiple Factors Behind the Rally
Several key drivers are influencing this bullish trend. According to Tony Sycamore, a market analyst at IG, the rise in prices can be attributed to a combination of factors. “I think the rally has a couple of factors behind it – shorts covering, the weaker USD which makes crude oil cheaper to buy, and the U.S. pressure on Iran,” he said.
Sycamore added that WTI could see further gains, potentially reaching between $65 and $67 per barrel, although he cautioned that economic concerns could limit upside potential. “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,” he warned.
Sanctions on Iran Stir Market Sentiment
The Trump administration heightened tensions by introducing a new round of sanctions targeting Iran’s oil sector, including action against a China-based “teapot” refinery. This move escalated U.S. efforts to isolate Tehran amid growing concerns over Iran’s nuclear ambitions.
The sanctions contributed to growing concerns over global oil supply, particularly as they could further limit Iranian crude exports.
OPEC Strives to Reinforce Production Discipline
Adding to the bullish sentiment was news from the Organization of the Petroleum Exporting Countries (OPEC). The cartel revealed that Iraq, Kazakhstan, and other nations had submitted updated plans to cut output in order to compensate for exceeding their agreed production quotas.
Michael McCarthy, CEO of Moomoo, noted that these developments likely reinforced market optimism. “Would argue that Iranian production (is) not significant and that OPEC quotas more often breached than observed, but both factors fed into the more bullish tone,” he said.
US Inventory Data Also Boosts Prices
Further strengthening oil prices was the latest inventory data from the U.S. Energy Information Administration. There were significant drawdowns in gasoline and distillate stocks, and the increase in crude inventories came in below expectations.
“Much of the recent selling pressure in global crude markets related to fears of an imminent flood of U.S. oil, but the drop in refining suggests that bottlenecks to supply may be emerging,” McCarthy added.
Outlook Clouded by Trade Concerns
Despite this week’s rally, not all forecasts are optimistic. OPEC, the International Energy Agency (IEA), and banks such as Goldman Sachs and JP Morgan all lowered their expectations for oil demand and price growth, citing global trade disruptions.
The World Trade Organization added to the cautious tone, predicting a 0.2% drop in goods trade for the year, a dramatic shift from its previous forecast of 3% growth made in October.