U.S. Imposes New Sanctions on Iran: Oil prices rose this week due to renewed concerns over tighter supplies, fueled by new U.S. sanctions on Iran and additional output cuts pledged by some OPEC members. U.S. West Texas Intermediate (WTI) crude rose to $63.13 a barrel, posting its highest level since April 3 and poised for its first weekly gain in three weeks. The rally is attributed to short covering, a weaker U.S. dollar, and mounting geopolitical tensions with Iran. President Trump's administration issued new sanctions targeting Iranian oil exports, including measures against a Chinese refinery. These developments have contributed to a bullish sentiment in the oil market.
OPEC+ Proceeds with Output Increase: OPEC+ has decided to proceed with a planned April oil output increase of 138,000 barrels per day, the group's first since 2022, which is likely to push prices down. This decision aims to gradually unwind previous output cuts, raising concerns about a potential oversupply in the market. Oil prices continued to fall on Tuesday after reports of the OPEC+ output increase and markets braced for U.S. tariffs on Canada, Mexico, and China to take effect. Analysts expect the tariffs to weigh on economic activity and fuel demand, putting downward pressure on oil prices. The combination of increased supply and potential demand reduction due to tariffs is influencing current oil market dynamics.
Surge in Russian Arctic Oil Exports to China: In April 2025, Russia's exports of Arctic oil to China are expected to increase significantly, driven by substantial discounts and the use of non-sanctioned tankers to bypass U.S. sanctions imposed in January. These sanctions targeted Russian Arctic oil grades such as ARCO, Novy port, and Varandey, as well as producer Gazprom Neft. To circumvent the restrictions, exporters are utilizing ship-to-ship transfers in international waters near Singapore and Malaysia to transfer oil to unsanctioned Very Large Crude Carriers, which then deliver the cargo to China. Analytics firm Vortexa estimates at least 4 million barrels were transferred via STS last week, with 16 million more expected in April. This surge in exports could impact global oil prices by increasing supply to the market.
Market Overview: Oil prices have rose to their highest levels in two weeks, driven by U.S. sanctions targeting Iranian oil exports and low market liquidity ahead of the Easter holidays. West Texas Intermediate (WTI) crude climbed to $63.19 per barrel, gaining 1.2% on the day. The new sanctions, including measures against a small Chinese refinery, increased concerns over global supply despite skepticism that they would significantly reduce Iranian crude flows to China. Meanwhile, OPEC received updated pledges from countries like Iraq and Kazakhstan to cut output, though compliance remains uncertain. Additional support for prices came from a decline in U.S. gasoline and distillate inventories, despite broader market caution due to downward revisions in global oil demand forecasts and economic concerns stemming from U.S. tariffs.
Crude Movement Since January 20th
In 2024, U.S. crude oil production grew by 270,000 barrels per day (b/d), reaching an average of 13.2 million b/d, with nearly all growth coming from the Permian region. The Permian, located in western Texas and southeastern New Mexico, accounted for 48% of total U.S. crude oil output, producing 6.3 million b/d. Despite a decrease of 26 active rigs from 2023, the region averaged 308 rigs due to improved well productivity and technological advancements. Tools like AI, electronic hydraulic fracturing, and automated drilling contributed to greater efficiency. WTI crude averaged $77 per barrel in 2024, remaining well above the Permian’s breakeven prices of $62–$64 per barrel, which supported continued drilling activity.
Oil prices rose over 3% on Thursday, fueled by optimism over a possible U.S.-EU trade deal and new U.S. sanctions targeting Iranian oil exports. U.S. West Texas Intermediate crude closed at $64.68 a barrel, up $2.21, while both WTI and Brent crude posted weekly gains of about 5%, their first in three weeks. The sanctions focused on Chinese “teapot” refineries and companies tied to Iran’s shadow oil fleet, heightening supply concerns. President Trump’s comments with Italy’s Prime Minister reinforced hopes that a trade resolution could reduce economic strain from tariffs. Despite this, major agencies and banks lowered their oil demand and price forecasts due to ongoing global trade tensions.
