The oil market was up by nearly 2 per cent on Wednesday due to concerns about global supplies after the United States issued new sanctions targeting Chinese importers of Iranian oil.
Brent crude futures grew by $1.18 or 1.8 per cent to $65.85 a barrel and the US West Texas Intermediate (WTI) crude futures expanded by $1.14 or 1.9 per cent to $62.47 per barrel.
The US on Wednesday issued new sanctions targeting Iran’s oil exports, including against a China-based small independent refineries known as teapots as President Donald Trump seeks to ramp up pressure on Iran and drive Iranian oil exports down to zero.
It imposed sanctions on a China-based independent teapot refinery it accused of playing a role in purchasing more than $1 billion worth of Iranian crude oil.
It was the second small independent Chinese refinery hit with sanctions by the Trump administration so far.
The US has not in the past focused on Chinese teapot refiners in part because they have little exposure to the US financial system.
The country also issued additional sanctions on several companies and vessels it said were responsible for facilitating Iranian oil shipments to China as part of Iran’s shadow fleet, adding that it is committed to disrupting all actors providing support to Iran’s oil supply chain, which it claims the regime uses to support its terrorist proxies and partners.
Normally, China does not recognize US sanctions and is the largest importer of Iranian oil. China and Iran have built a trading system that uses mostly Chinese Yuan and a network of middlemen, avoiding the dollar and exposure to US regulators.
However, Chinese state-run oil firms have stopped buying Iranian crude, on concerns of running afoul of sanctions.
The Organisation of the Petroleum Exporting Countries (OPEC) has received updated plans for Iraq, Kazakhstan and other countries to make further oil output cuts to compensate for pumping above agreed quotas.
The latest plan requires seven nations – Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan and Oman – to cut output by a further 369,000 barrels per day in monthly steps between now and June 2026, compared with an earlier plan running from March until next June, according to Reuters calculations.
Under the latest plan, monthly cuts will range from 196,000 barrels per day to 520,000 barrels per day from this month until June 2026, up from between 189,000 barrels per day and 435,000 barrels per day previously.
If successfully executed, the compensation plan would to a large extent offset a planned 411,000 barrels per day output increase being made by other members of OPEC+ in May.
US crude stockpiles rose while gasoline and distillate inventories fell last week, the Energy Information Administration (EIA) said, showing that crude inventories rose by 515,000 barrels to 442.9 million barrels in the week ended April 11.