Oil prices extended their gains on Thursday amid prospects of tighter supply as some OPEC producers pledged more output cuts to compensate for pumping above agreed quotas and Washington imposed additional sanctions on Iranian oil trade.
As of 4:45 GMT, Brent crude futures were up 1.09 percent to $66.57, and U.S. West Texas Intermediate crude rose 1.36 percent to $63.32. Both benchmarks settled 2 percent higher on Wednesday, recording their highest levels since April 3, and both are on track for their first weekly rise in three weeks.
Tighter supply signals boost oil prices
A weaker U.S. dollar, which makes crude oil cheaper to buy, and American pressure on Iran, have been key factors in propelling oil prices from their latest lows. The dollar index hovered on Thursday near a three-year low it hit last week.
In addition, U.S. President Donald Trump’s administration issued new sanctions targeting Iran’s oil exports on Wednesday, including sanctions against a China-based oil refinery, raising pressure on Tehran amid talks regarding the country’s escalating nuclear program.
Adding to supply concerns, the Organization of the Petroleum Exporting Countries (OPEC) said on Wednesday that it received updated plans for Iraq, Kazakhstan and other countries to make further output cuts to compensate for pumping above quotas. OPEC+, which includes OPEC, Russia and other allies, has implemented a series of output cuts since late 2022 to float oil prices. Its compensation plan is designed to ensure that members who do not make the cuts in full implement further reductions.
The latest plan requires seven nations to cut output by an additional 369,000 barrels per day in monthly increments until June 2026. This compensation plan, if implemented in full, would largely offset the planned 411,000 bpd output increase being made by other members of OPEC+ in May, providing additional support for the oil market.
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Trade tensions trigger oil demand forecast cuts
Despite current supply concerns, OPEC and the International Energy Agency cut forecasts on oil prices and demand growth this week as U.S. tariffs and retaliations from other countries raised global trade tensions further. The World Trade Organization said it expected trade in goods to fall by 0.2 percent this year, down from its expectation of a 3.0 percent expansion in October.
In addition, the UN Trade and Development (UNCTAD) warned in a new report that the global economy is on a recessionary trajectory, driven by escalating trade tensions and persistent uncertainty. Global economic growth is projected to slow to 2.3 percent in 2025, placing the world economy on a recessionary path, the report said, citing mounting threats including trade policy shocks, financial volatility and a surge in uncertainty that risks derailing the global outlook.
A slowdown in global economic growth risks a decline in oil demand, which may impact prices in the future.
