Oil Posts Weekly Gain over Budding Uncertainties
Oil posted weekly gains in the global commodity market, driven by escalating tensions in the Middle East, fresh US sanctions on Iranian crude exports, and China’s latest economic stimulus measures.
Brent crude traded at $71.22 per barrel on Friday, up by around 1.4% from last week’s closing price of $70.24 per barrel.
West Texas Intermediate (WTI), the American benchmark, traded at $67.78 per barrel at the same time on Friday, up about 1.3% from last Friday’s closing price of $66.91 per barrel.
On Thursday, the Houthi group reported that US warplanes conducted four new airstrikes in Yemen’s Al-Hudaydah province, a strategic coastal hub with an international airport and three key ports.
The latest strikes follow US President Donald Trump’s announcement of a ‘major attack’ against the Houthis last Saturday. Since then, US airstrikes in Yemen have intensified, with Houthi reports citing 53 fatalities and 107 injuries, including women and children.
These are the first American airstrikes on Yemen since the Israel-Hamas ceasefire took effect on January 19. Houthi forces have targeted Israeli-linked vessels in the Red Sea and Gulf of Aden since late 2023, disrupting global trade in what they claim is an act of solidarity with Gaza.
While the group halted attacks following the January ceasefire, it threatened to resume operations after Israel blocked humanitarian aid into Gaza on March 2.
The heightened risk to maritime security in the Red Sea is raising concerns about potential disruptions to global oil supply. Meanwhile, US sanctions on Iran’s oil exports further supported upward price movements by fueling market players’ supply concerns.
The US Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions on Thursday targeting entities involved in Iranian oil exports.
In a statement, the OFAC said it designated ‘a teapot oil refinery and its chief executive officer for purchasing and refining hundreds of millions of dollars’ worth of Iranian crude oil,’ including from vessels linked to the Foreign Terrorist Organization, Ansarallah, commonly known as the Houthis, and the Iranian Ministry of Defense of Armed Forces Logistics (MODAFL).
Treasury Secretary Scott Bessent said teapot refinery purchases of Iranian oil ‘provide the primary economic lifeline for the Iranian regime, the world’s leading state sponsor of terror.’
In addition to sanctioning 19 entities and vessels tied to Iran’s ‘shadow fleet,’ Washington also blacklisted a Chinese oil terminal accused of purchasing and storing Iranian crude.
‘Teapot refiners are private Chinese refineries that are the primary purchasers of Iranian oil. This will be the US’ first designation of a teapot refinery,’ the department said. Moreover, expectations of stronger demand from China—the world’s largest crude importer—have pushed prices up.
Beijing announced a sweeping stimulus package on Sunday aimed at boosting domestic consumption, reinforcing optimism that oil demand will rise. While oil markets remain volatile, the combination of geopolitical risks and stronger Chinese consumption is helping offset bearish supply-side pressures.
Oil prices rallied yesterday with Brent settling more than 1.7% higher on the day at US$72/bbl, the highest close this month. And this strength has continued in early morning trading in Asia.
OPEC+ members issued a schedule for making oil output cuts to compensate for overproduction. The cuts will run until June 2026. These monthly cuts will range between 189,00 b/d and 435,000 b/d, ING says. Importantly, they more than offset the monthly supply increases set to start in April.
However, while the group shares a plan for compensation cuts, it certainly doesn’t mean members will follow it. A handful of members have consistently produced above their target production levels. US natural gas prices sold off heavily yesterday, with the front-month Henry Hub contract settling 6.4% lower. The downward pressure has continued this morning.
This is after the Energy Information Administration (EIA) reported that US natural gas storage increased by 9 bcf over the last week, above the expected 5 bcf increase. However, total storage levels are still tight, standing at 1.71 tcf, down 26.8% year on year and 10% below the five-year average. NELFUND disburses N35bn to 261,000 students