Crude oil logs biggest weekly gain since January on US sanctions, OPEC+ group cuts: Brent gains over 2% in five days

International crude oil prices settled higher in the previous session, logging a second consecutive and the biggest weekly gain since early January after fresh US sanctions on Iran and the latest output plan from the Organisation of Petroleum Exporting Countries (OPEC) raised expectations of a tighter supply.

Brent crude futures rose 16 cents, or 0.2 per cent, to $72.16 a barrel. US West Texas Intermediate (WTI) crude futures rose 21 cents, or 0.3 per cent, to $68.28. On a weekly basis, Brent crude oil rose nearly 2.1 per cent and US WTI about 1.6 per cent, their biggest gains since the first week of the year.

Also Read: Crude oil outlook: Goldman Sachs lowers Brent year-end forecast by $5 on subdued demand, higher OPEC+ supply

Brent logs longest weekly gain since January: What's driving crude oil?

-On Thursday, the US Treasury announced new Iran-related sanctions, which, for the first time, targeted an independent Chinese refiner among other entities and vessels involved in supplying Iranian crude oil to China.

-It was the US' fourth round of sanctions against Tehran since Donald Trump in February promised maximum pressure and pledged to drive Iran's oil exports down to zero. According to analysts, tightening the US sanctions will keep market participants involved in shipping Iranian crude more cautious.

-Analysts at ANZ Bank said they expect a one million barrels per day (bpd) reduction in Iranian crude oil exports because of tighter sanctions. Vessel tracking service Kpler estimated Iranian crude oil exports above 1.8 million bpd in February.

-Oil prices were also supported by the new OPEC plan for seven members to cut output further to compensate for producing more than agreed levels. The plan would represent monthly cuts of 189,000 bpd and 435,000 bpd until June 2026.

Also Read: India’s crude oil imports rise from Africa, Latin America in February amid US sanctions on Russian supply

-OPEC confirmed that eight of its members would proceed with a monthly increase of 138,000 bpd from April, reversing some of the 5.85 million bpd of output cuts agreed in a series of steps since 2022 to support the market.

-According to analysts, oil market participants will want more proof of Iraq, Kazakhstan, and Russia complying with cuts to gain more support for the plan. Kazakhstan's oil output reached a record high in March due to oilfield expansion, further exceeding OPEC production quotas.

Crude oil outlook: Where are Brent, US WTI headed?

"The risk premium edges higher, with Israel resuming airstrikes in Gaza, breaking a two-month ceasefire and US strikes on Houthi targets in Yemen. US crude oil stocks rose by 1.7 million barrels during the week ending March 14, while gasoline and distillates saw declines of 500,000 and 2.8 million barrels," said Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.

Also Read: India spent ₹1.15 lakh crore on purchasing Russian crude oil since Ukraine war, China emerges biggest buyer: Report

"OPEC+ announced a revised schedule for seven members, including Russia, Kazakhstan, and Iraq, to make further oil output cuts of between 189,000 bpd and 435,000 bpd monthly to compensate for overproduction, which will more than overtake the monthly production hikes planned for next month," added Chainwala.

Rahul Kalantri, VP of Commodities at Mehta Equities Ltd, expects crude oil prices to remain volatile. Crude oil has support at $67.70-67.00, and resistance is seen at $68.90-69.60. In INR, crude oil has support at ₹5,820-5,760 while resistance at ₹5,970-6,050," said the commodity expert.

With inputs from Reuters

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.