Oil Prices Climb as U.S. Sanctions on Iran Stoke Supply Fears
Oil prices advanced for a second consecutive day on Tuesday following the imposition of new U.S. sanctions on Iran, a key Middle Eastern oil producer, raising concerns over potential supply constraints. Additionally, global refining margins remained strong, further supporting market sentiment.
Brent crude futures increased by 15 cents, or 0.2%, reaching $74.93 per barrel by 0724 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose by 23 cents, or 0.3%, to $70.93 per barrel. Both contracts had posted gains in Monday’s session after experiencing a $2 decline last Friday.
"In the short term, I continue to think crude oil is looking for a base. The fresh U.S. sanctions announced on Iran overnight will likely assist with this, as will the Iraqi oil minister's commitment to rein in its oversupply," stated IG market analyst Tony Sycamore.
On Monday, the U.S. government imposed additional sanctions on more than 30 brokers, tanker operators, and shipping companies involved in the transportation of Iranian oil. President Donald Trump has reiterated his objective of reducing Iran’s crude exports to zero.
Iran, the third-largest producer within the Organization of the Petroleum Exporting Countries (OPEC), recorded an output of 3.2 million barrels per day in January, according to a Reuters survey of OPEC production levels.
Market analysts also noted that sustained fuel demand in Western economies continues to provide support to oil prices.
"Globally, complex refining margins remain robust, with strong fuel oil and distillate cracks, particularly in the U.S. Gulf Coast and Northwest Europe, benefiting from increased heating oil demand due to the cold snap," observed Neil Crosby, an analyst at Sparta Commodities.
According to LSEG pricing data, margins for a typical refinery in Singapore processing regional benchmark Dubai crude averaged $3.50 per barrel in February, compared to $2.30 per barrel in the previous month.
Despite these gains, overall price increases were tempered by uncertainty surrounding demand prospects and the absence of fresh economic indicators from China, a key consumer.
"At this juncture, clear demand-side factors that can propel oil prices higher remain uncertain. However, greater clarity is expected by mid-March, when Chinese policymakers are likely to announce new stimulus measures and a 2025 growth target following the conclusion of the 'Two Sessions'," said Kelvin Wong, a senior market analyst at OANDA.
Meanwhile, U.S. President Donald Trump reaffirmed on Monday that tariffs on Canadian and Mexican imports, set to take effect on March 4, remain "on time and on schedule." This announcement comes despite ongoing negotiations by both trading partners to address U.S. concerns regarding border security and fentanyl trafficking. Analysts have warned that the imposition of these tariffs could negatively impact global oil demand growth.