Oil prices saw a modest increase on Monday as investors weighed the potential impact of fresh US sanctions on Iranian oil exports against ongoing ceasefire negotiations aimed at resolving the Russia-Ukraine conflict. These developments have created uncertainty in the market, with the possibility of increased Russian oil supplies to global markets adding complexity to the outlook.
By 0735 GMT, Brent crude futures were up by 4 cents, reaching $72.20 per barrel, while US West Texas Intermediate (WTI) crude rose 8 cents, or 0.1%, to $68.36.
Earlier in the day, prices had been lower. However, both oil benchmarks saw gains on Friday, marking their second consecutive weekly rise. This upward movement was driven by the latest round of US sanctions on Iran and the ongoing output strategy of the OPEC+ producer group, which raised expectations for tighter global oil supplies.
Market sentiment has improved recently, partly due to a technical rebound from previous oversold conditions and growing concerns over supply risks from US sanctions on Iranian oil exports. Additionally, some analysts have pointed to optimism that US tariffs may not be as severe as initially feared, according to IG market strategist Yeap Jun Rong.
As a result of the new US sanctions on Iranian oil, shipments to China are expected to decline in the short term. These sanctions target a privately owned refiner and several tankers, leading to higher shipping costs. However, traders believe that workarounds will be found, ensuring that at least some volume of Iranian oil will continue to flow.
Despite these developments, the broader supply-demand outlook for oil remains uncertain. Talks between Russia and Ukraine regarding a ceasefire have raised the possibility of increased Russian oil exports if a resolution is reached, which could impact global oil prices. Meanwhile, OPEC+ is set to increase oil production as early as April, which may contribute to additional supply.
On Monday, a US delegation will meet with Russian officials to discuss progress on a Black Sea ceasefire and a broader halt to hostilities in Ukraine. These negotiations could have a significant impact on oil prices, as any potential easing of sanctions on Russian oil could lead to a shift in supply dynamics.
Additionally, Sinopec, China’s largest oil refiner, reported a 16.8% decline in its 2024 net profit, attributing the drop to falling oil prices. This news further highlights the challenges faced by the oil market in an environment of fluctuating prices and geopolitical uncertainty.
Analysts, including Toshitaka Tazawa from Fujitomi Securities, noted that while expectations for progress in the Russia-Ukraine peace talks have pressured oil prices lower, investors remain cautious. Many are waiting for clearer signals on future OPEC+ production trends, especially after the group’s announcement last week regarding new production cuts to balance output discrepancies.
OPEC+ has been implementing significant output cuts of 5.85 million barrels per day, approximately 5.7% of global supply, since 2022 in an effort to support market stability. The group also confirmed that from April, eight of its members would increase production by 138,000 barrels per day each, citing improved market fundamentals.
As the oil market continues to grapple with these complex factors, investors are closely monitoring geopolitical developments and OPEC+ policies to gauge future price movements.
