Oil prices rose on Friday and were set for a second consecutive weekly gain as new U.S. sanctions on Iran and a plan from OPEC+ to cut output raised bets on tighter supply.
Brent crude futures rose 0.37 percent to $72.27 per barrel as of 6:36 GMT. Meanwhile, U.S. West Texas Intermediate crude gained 0.40 percent to $68.34. Both Brent and WTI were on track to rise about 2 percent this week, their biggest weekly gains since the first week of 2025.
New Iran sanctions to limit supply
The United States Treasury announced on Thursday new sanctions on Iran, which for the first time targeted an independent Chinese refiner among other entities and vessels involved in supplying Iranian crude oil to China. Analysts noted that the impact of these sanctions is limited but they raise the risk premium as they signal a clear escalation in sanctions policy.
This decision marked Washington’s fourth round of sanctions against Iran since U.S. President Donald Trump promised in February to reimpose a “maximum pressure” campaign on Tehran, pledging to drive the country’s oil exports to zero.
Oil prices gained around a dollar following the announcement. Iran produces more than 3 million barrels per day of crude oil and China is the largest importer of this oil.
OPEC+ cuts production for seven members
Oil prices were also supported by the Organization of Petroleum Exporting Countries and its allies’ new plan announced Thursday for seven members to further cut output to make up for producing more than agreed levels. The plan would represent monthly cuts of between 189,000 barrels per day and 435,000 barrels per day and will last until June 2026.
On the other hand, U.S. crude inventories rose by 1.7 million barrels, exceeding expectations for an increase of 512,000 barrels. Another factor that limited gains in oil prices was the dollar, which rose after the Federal Reserve indicated on Wednesday it was in no rush to cut interest rates further this year due to uncertainties around U.S. tariffs.
The U.S. dollar index gained 0.15 percent to 104.01 on Friday, making crude more expensive for foreign buyers.
The U.S. central bank left its key interest rate unchanged on Wednesday, a move widely expected by the market, but maintained its projection of two 25-basis-point rate cuts by the end of this year. Interest rate cuts typically boost economic activity and energy demand.
Read: UAE gold prices dip AED0.5, global rates set for third weekly gain on rate cut hopes
Mideast tensions raise global risk premiums
Global risk premiums rose after Israel launched a new operation on Wednesday in Gaza, breaking a ceasefire that lasted nearly two months. Additionally, the U.S. administration pledged last week to continue airstrikes against Yemen.
The escalating conflict has heightened concerns regarding potential disruptions to crucial shipping routes in the Red Sea, significantly impacting global oil markets. The Middle East region plays a vital role in global energy markets, and increased tensions can lead to apprehensions about possible disruptions.
Tensions in the Red Sea also rose while hostilities between Russia and Ukraine continued despite talks to achieve a 30-day ceasefire from attacking energy facilities.
