Oil has been rising from recent lows as traders factor in the potential for reduced supply.
USOIL – Daily Chart
USOIL is now looking for support once more at the 2024 low near $65. The price is now looking for a move above $70 to secure this level as a medium-term low.
The US Treasury announced another round of Iran-related sanctions, which also targeted an independent Chinese refiner and other entities involved in supplying Iranian crude oil to China. The market got the message that Chinese companies, the largest buyers of Iranian oil, are not immune to sanctions pressure from the US.
It was Washington’s fourth round of sanctions against Tehran since President Trump promised “maximum pressure” and pledged to drive Iran’s oil exports down to zero. The tightening sanctions regime will probably keep some market participants more cautious in the future about dealing with Iranian firms and threatens to limit global supply.
Analysts at ANZ Bank said they expect a 1 million barrels per day (bpd) reduction in Iranian crude oil exports because of tighter sanctions. Iranian crude oil exports were above 1.8 million bpd in February.
Oil prices were also helped by an OPEC+ plan among seven of its members to cut output further to compensate for producing higher levels than previously agreed. The plan would mean monthly cuts of between 189,000 bpd and 435,000 bpd until June 2026.
OPEC+ said earlier this month that eight of its members would proceed with a monthly increase of 138,000 bpd from April. The goal is to reverse some of the 5.85 million bpd of output cuts agreed in 2022 to support the market.
Oil market participants will want to see proof that Iraq, Kazakhstan, and Russia are complying with the planned cuts before oil prices are boosted further. Kazakhstan’s oil output reached a record high in March, following oilfield expansion.
Oil company shares could represent value if the price of crude can hold this level as a low.
