Crude Oil Soars on Tighter Supply

Brent crude futures went up by 16 cents or 0.2 per cent to settle at $72.16 a barrel and the US West Texas Intermediate (WTI) crude futures rose by 21 cents or 0.3 per cent to $68.28 per barrel.

For the week, Brent increased by 2.1 per cent and WTI expanded by about 1.6 per cent.

The US Treasury announced new Iran-related sanctions, which for the first time targeted an independent Chinese refiner among other entities and vessels involved in supplying Iranian crude oil to China.

The move was the fourth round of sanctions on Iran’s oil sales since President Donald Trump said in February he was re-imposing a maximum pressure campaign including efforts to drive down the country’s exports to zero.

The US claimed that refinery purchases of Iranian oil provides the primary economic lifeline for the Iranian regime, making the world’s leading state sponsor of terror and the primary backer of the murderous Houthis in Yemen.

Chinese state-run oil firms have stopped buying Iranian crude, on concerns of running afoul of sanctions.

However, China does not recognize US sanctions and is the largest importer of Iranian oil as both countries have built a trading system that uses mostly Chinese Yuan and a network of middlemen, avoiding the Dollar and exposure to US regulators.

Market analysts noted that tightening US sanctions regime will probably keep some market participants involved in shipping Iranian crude more cautious going forward with expectations of up to a reduction of 1 million barrels per day.

Also supporting prices is the new OPEC+ plan for seven members to cut output further to compensate for producing more than agreed levels.

The plan would represent monthly cuts of between 189,000 barrels per day and 435,000 barrels per day until June 2026.

On March 3, eight of its members including Russia, Saudi Arabia, UAE, Kuwait, Oman, Algeria, Kazakhstan and Iraq planned a monthly increase of 138,000 barrels per day from April, citing healthier market fundamentals.

However, the plan likely caps the upside in OPEC+ production over the coming months.