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Oil Extends Rally As Middle East Tensions And Iran Sanctions Drive Second Weekly Gain
(MENAFN- The Rio Times) Crude oil prices continued their upward trajectory this morning, building on Thursday's gains. WTI crude is currently trading at $68.35, up from yesterday's close of $68.07, representing a modest increase of 0.41%.
Brent crude has pushed above the $72 mark, extending its 1.7% advance from Thursday. The oil market is positioned for its second consecutive week of gains, with both Brent and WTI on track for approximately 2% weekly increases – their most significant since early 2025.
Thursday saw robust oil price gains driven by multiple factors. U.S. government data revealed a larger-than-expected decrease in distillate inventories, which fell by 2.8 million barrels, significantly outpacing forecasts of a 300,000-barrel reduction.
This decline in fuel stocks signaled healthy demand fundamentals in the world's largest oil consumer. WTI closed at $67.14 on Thursday, gaining $0.24, while Brent ended at $70.56, up $0.18.
In addition, trading volumes remained solid, with NYMEX recording approximately 600,000 WTI futures contracts and London ICE seeing around 450,000 Brent contracts change hands.
Overnight Developments
The upward momentum continued during Asian trading hours, with prices nudging higher. A significant development occurred as the U.S. Treasury Department unveiled new sanctions targeting Iran's oil exports, which for the first time included penalties against a Chinese refinery.
This marked the fourth round of sanctions since President Trump pledged in February to reinstate a "maximum pressure" campaign aimed at reducing Iranian oil exports to zero.
Price Drivers
Geopolitical Tensions
The market remains heavily influenced by geopolitical developments. Israel initiated a new ground offensive in Gaza on Wednesday, breaking a nearly two-month ceasefire. Simultaneously, U.S. airstrikes against Houthi positions in Yemen continue in response to the group's attacks on vessels in the Red Sea.
Conversely, a Russia-Ukraine ceasefire announced earlier this week has helped ease some supply concerns, though traders remain cautious about its sustainability.
Supply Dynamics
The OPEC+ group's production plans continue to be a critical market factor. While the group has delayed production increases, keeping output steady, there are expectations that gradual unwinding of voluntary cuts could begin in April.
U.S. Strategic Petroleum Reserve levels continue their recovery, reaching 395.59 million barrels as of March 7, 2025 – a 9.59% increase from one year ago.
Demand Outlook
The global oil demand growth outlook remains relatively strong despite macroeconomic uncertainties. JPMorgan analysts noted that "U.S. oil demand outlook remains healthy despite lower air travel passenger volumes," adding that reduced U.S. travel activity did not signal broader weakness in demand prospects.
Global oil demand is averaging 101.8 million barrels per day. This represents an annual increase of 1.5 million bpd, according to their analysis.
Regional Market Analysis
United States
The U.S. continues to produce at record levels and is forecast to be the largest source of supply growth in 2025. Yesterday's inventory report showed U.S. crude stockpiles increased by 1.7 million barrels, exceeding expectations for a 512,000-barrel rise.
Asia and China
China remains a crucial focus for market participants. OPEC projects China's oil demand will increase by 310,000 bpd in 2025, while the IEA offers a more conservative estimate of 228,000 bpd.
However, actual crude imports have been declining. Data shows arrivals of 10.42 million bpd during the initial months of 2025, down 3.4% from the same period in 2024.
Middle East
Supply risks from the Middle East continue to support risk premiums in crude prices. Analysts from ANZ Bank anticipate a reduction of approximately 1 million bpd in Iranian crude oil exports due to intensified sanctions.
Technical Analysis
Brent crude oil continues to move within a "Wedge" pattern formation, with current price action testing the area between signal lines. Moving averages indicate a short-term bearish trend, suggesting pressure from sellers.
Technical analysts anticipate a potential bullish correction and test of resistance near $71.25 for Brent before a possible continuation of the downward trend toward the $66.05 area. A breakout above the $74.55 level would invalidate the bearish scenario.
Market Outlook
Wood Mackenzie's latest forecast sees Brent crude averaging $73 per barrel in 2025, down $7 from 2024 levels. Their outlook is primarily shaped by two factors: OPEC+ production plans and U.S. tariff policies.
The IEA projects that global oil supply may exceed demand by around 600,000 bpd this year, with potential for an additional 400,000 bpd if OPEC+ extends the unwinding of output cuts beyond April without addressing overproduction by some members.
As trading continues today, market participants will closely monitor developments related to Iran sanctions and OPEC+ compliance. They will also watch broader economic indicators that could impact oil demand forecasts.
Brent crude has pushed above the $72 mark, extending its 1.7% advance from Thursday. The oil market is positioned for its second consecutive week of gains, with both Brent and WTI on track for approximately 2% weekly increases – their most significant since early 2025.
Thursday saw robust oil price gains driven by multiple factors. U.S. government data revealed a larger-than-expected decrease in distillate inventories, which fell by 2.8 million barrels, significantly outpacing forecasts of a 300,000-barrel reduction.
This decline in fuel stocks signaled healthy demand fundamentals in the world's largest oil consumer. WTI closed at $67.14 on Thursday, gaining $0.24, while Brent ended at $70.56, up $0.18.
In addition, trading volumes remained solid, with NYMEX recording approximately 600,000 WTI futures contracts and London ICE seeing around 450,000 Brent contracts change hands.
Overnight Developments
The upward momentum continued during Asian trading hours, with prices nudging higher. A significant development occurred as the U.S. Treasury Department unveiled new sanctions targeting Iran's oil exports, which for the first time included penalties against a Chinese refinery.
This marked the fourth round of sanctions since President Trump pledged in February to reinstate a "maximum pressure" campaign aimed at reducing Iranian oil exports to zero.
Price Drivers
Geopolitical Tensions
The market remains heavily influenced by geopolitical developments. Israel initiated a new ground offensive in Gaza on Wednesday, breaking a nearly two-month ceasefire. Simultaneously, U.S. airstrikes against Houthi positions in Yemen continue in response to the group's attacks on vessels in the Red Sea.
Conversely, a Russia-Ukraine ceasefire announced earlier this week has helped ease some supply concerns, though traders remain cautious about its sustainability.
Supply Dynamics
The OPEC+ group's production plans continue to be a critical market factor. While the group has delayed production increases, keeping output steady, there are expectations that gradual unwinding of voluntary cuts could begin in April.
U.S. Strategic Petroleum Reserve levels continue their recovery, reaching 395.59 million barrels as of March 7, 2025 – a 9.59% increase from one year ago.
Demand Outlook
The global oil demand growth outlook remains relatively strong despite macroeconomic uncertainties. JPMorgan analysts noted that "U.S. oil demand outlook remains healthy despite lower air travel passenger volumes," adding that reduced U.S. travel activity did not signal broader weakness in demand prospects.
Global oil demand is averaging 101.8 million barrels per day. This represents an annual increase of 1.5 million bpd, according to their analysis.
Regional Market Analysis
United States
The U.S. continues to produce at record levels and is forecast to be the largest source of supply growth in 2025. Yesterday's inventory report showed U.S. crude stockpiles increased by 1.7 million barrels, exceeding expectations for a 512,000-barrel rise.
Asia and China
China remains a crucial focus for market participants. OPEC projects China's oil demand will increase by 310,000 bpd in 2025, while the IEA offers a more conservative estimate of 228,000 bpd.
However, actual crude imports have been declining. Data shows arrivals of 10.42 million bpd during the initial months of 2025, down 3.4% from the same period in 2024.
Middle East
Supply risks from the Middle East continue to support risk premiums in crude prices. Analysts from ANZ Bank anticipate a reduction of approximately 1 million bpd in Iranian crude oil exports due to intensified sanctions.
Technical Analysis
Brent crude oil continues to move within a "Wedge" pattern formation, with current price action testing the area between signal lines. Moving averages indicate a short-term bearish trend, suggesting pressure from sellers.
Technical analysts anticipate a potential bullish correction and test of resistance near $71.25 for Brent before a possible continuation of the downward trend toward the $66.05 area. A breakout above the $74.55 level would invalidate the bearish scenario.
Market Outlook
Wood Mackenzie's latest forecast sees Brent crude averaging $73 per barrel in 2025, down $7 from 2024 levels. Their outlook is primarily shaped by two factors: OPEC+ production plans and U.S. tariff policies.
The IEA projects that global oil supply may exceed demand by around 600,000 bpd this year, with potential for an additional 400,000 bpd if OPEC+ extends the unwinding of output cuts beyond April without addressing overproduction by some members.
As trading continues today, market participants will closely monitor developments related to Iran sanctions and OPEC+ compliance. They will also watch broader economic indicators that could impact oil demand forecasts.
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