Oil prices rose sharply on Thursday, posting a weekly gain as optimism surrounding a potential trade deal between the United States and the European Union and new U.S. sanctions on Iranian oil exports helped boost sentiment. The rise was also supported by supply concerns, particularly in the face of ongoing geopolitical tensions.
Oil Price Movements
Brent Crude futures surged by $2.11 or 3.2%, closing at $67.96 per barrel.
West Texas Intermediate (WTI) crude climbed $2.21 or 3.54%, settling at $64.68 per barrel.
These gains reflect a combination of positive market sentiment fueled by trade deal optimism and concerns about global oil supply.
Trade Deal Hopes with the EU
U.S. President Donald Trump and Italian Prime Minister Giorgia Meloni met in Washington to discuss trade relations, expressing optimism about resolving ongoing tensions between the U.S. and Europe. Trump conveyed confidence, stating, “We’re going to have very little problem making a deal with Europe or anybody else, because we have something that everybody wants.”
A successful trade agreement with the EU could help mitigate potential oil demand destruction caused by tariffs, according to Bob Yawger, director of energy futures at Mizuho. If trade tensions ease, the resulting economic stability could help support global oil demand.
New U.S. Sanctions on Iranian Oil Exports
In addition to trade optimism, the U.S. government ramped up its sanctions on Iran, targeting Chinese importers of Iranian oil, including several “teapot” oil refineries—small, independent refineries that process Iranian crude. These sanctions are part of the U.S. strategy to intensify pressure on Tehran amid ongoing nuclear program negotiations.
John Kilduff, partner at Again Capital, noted, “These are far-ranging sanctions, focusing on the Chinese teapot refineries,” adding that this could lead to a potential supply loss to the market, tightening global crude supply.
Moreover, Washington imposed additional sanctions on companies and vessels that facilitate Iranian oil shipments to China, further curbing Iran’s ability to export crude oil.
OPEC+ Production Cuts
The Organization of the Petroleum Exporting Countries (OPEC) also provided the market with reassurances, stating it has received updated plans from Iraq, Kazakhstan, and other OPEC+ members to cut oil production further. These measures are aimed at compensating for the countries’ overproduction above their allocated quotas.
OPEC’s flexibility to adjust output is seen as an effort to maintain balance in the global oil market amidst the volatile geopolitical and economic climate.
Global Economic Outlook and Lower Oil Demand Projections
Despite the week’s gains, concerns over the broader economic environment remain, as U.S. tariffs and retaliatory measures from other countries continue to create uncertainty. Both OPEC and the International Energy Agency (IEA) have lowered their forecasts for oil prices and global demand growth this week due to the disruption in global trade caused by tariffs.
Analysts at Gelber and Associates noted that the market remains in a fragile state, with sanctions and trade disruptions further complicating the outlook for global oil demand. Additionally, major banks like Goldman Sachs and JPMorgan have also adjusted their growth expectations downward.
Looking Ahead
While oil prices have enjoyed a boost from geopolitical developments and market reassurances, the market’s future trajectory remains uncertain. The combination of sanctions on Iranian oil exports, trade deal negotiations, and OPEC+ production adjustments will continue to influence oil price movements. However, ongoing risks to global economic growth, such as trade wars and tariffs, will likely keep market volatility high in the coming weeks.
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