Oil prices rose by 1% as US sanctions on Iran and Russia countered concerns over weak demand forecasts. Brent crude climbed above $70.5 per barrel, and West Texas Intermediate hovered near $67,3, recovering from losses driven by the International Energy Agency’s (IEA) warning of an impending supply surplus due to trade tensions and increased OPEC+ output.
The White House imposed sanctions on Iran’s oil minister and tightened restrictions on companies and vessels involved in transporting Iranian crude. Additionally, the US limited payment options for Russian energy, further disrupting global oil flows. Market analysts at ANZ Group Holdings noted that supply disruptions from Iran and Venezuela, along with Canadian tariffs, are keeping the market tight despite the broader surplus outlook.
Oil also rebounded following uncertainty over a Ukraine ceasefire. Russian President Vladimir Putin expressed conditional support for a US ceasefire proposal but sought clarifications, reducing optimism for a swift resolution. This prolonged conflict limits the potential return of Russian energy supplies to global markets. IG market analyst Tony Sycamore highlighted that the US is unlikely to lift sanctions until a ceasefire is fully agreed upon.
Meanwhile, the global trade war escalated, with former US President Donald Trump threatening tariffs on European alcohol imports. These economic tensions, coupled with weaker-than-expected demand, led the IEA to revise its oil demand growth estimates downward for late 2024 and early 2025. The agency projected a global supply surplus of around 600,000 barrels per day, largely driven by US production.
Despite these headwinds, geopolitical uncertainties continue to influence oil prices. While short-term forecasts suggest potential price declines, disruptions in key supply regions may sustain market volatility.