Oil bounces off multi-week low on fresh US sanctions against Iran

24/02/2025 01:22 AST

Oil prices edged higher on Monday as fresh US sanctions on Iran and a commitment to compensate for overproduction by Iraq added to concerns of near-term supply tightness, helping the market recover some of Friday's steep losses.

Global benchmark Brent crude futures, which closed at their lowest since February 6 on Friday, were up 35 cents, or 0.5%, to $74.78. U.S. West Texas Intermediate crude futures were up 32 cents, or 0.5%, to $70.72 a barrel by 11:38 a.m. (1638 GMT), recovering from their lowest settlement so far this year in the prior session.

The United States imposed a fresh round of sanctions targeting Iran's oil industry on Monday, hitting more than 30 brokers, tanker operators, and shipping companies for their role in selling and transporting Iranian petroleum, the Treasury Department said.

That might have had a modest impact on crude oil prices, along with the Iraqi oil ministry's reaffirmation of its commitment to the OPEC+ group's supply agreement, UBS analyst Giovanni Staunovo said.

He cautioned, however, that Iranian crude oil exports remain elevated so far. "Time will tell if (the sanctions) impact exports," he said.

Meanwhile, Iraq said it would present an updated plan to compensate for any overproduction of its OPEC+ production quotas in recent months. Earlier on Sunday, Iraq said it will export 185,000 barrels per day from Kurdistan's oilfields through the Iraq-Turkey pipeline once oil shipments resume.

Oil prices were bound to recover from the prior session's steep selloff, when expectations of the resumption in northern Iraqi exports and of an end to the war in Ukraine pulled benchmarks more than $2 lower, Commodity Context analyst Rory Johnston said.

The market structure has also flashed signs of near-term supply tightness in recent sessions, he added. The premium of front-month Brent futures over the next month's contract was at its highest on Monday since February 11, having climbed steadily over the past week.

However, analysts cautioned oil prices are still likely to be under pressure going forward as talks to end the war in Ukraine progress, with a slew of U.S. tariff measures against trading partners also expected to weigh on economic activity and crude oil demand.

Officials said on Sunday that European Union leaders will meet for an extraordinary summit on March 6 to discuss additional support for Ukraine and European security guarantees. Ukrainian President Volodymyr Zelenskiy said on Sunday that he was willing to step down if it meant peace for his country.

"We're just clearing out room to trade lower and I would be cautious if I was a buyer in the market today," Mizuho analyst Robert Yawger said. "Just sitting here, waiting for the next big event to happen, and obviously there are plenty of big ones out there that could hit any moment."

Reuters