U.S. Sanctions Drive Oil Prices Higher

Oil prices saw their largest single-day gain in over two weeks, driven by new U.S. sanctions targeting Iranian crude exports. West Texas Intermediate (WTI) rose 2.7%, settling near $70 per barrel, while Brent climbed to over $73 per barrel. The sanctions, which affected 35 entities and vessels, aim to curb illicit Iranian oil exports, potentially reducing global supply.

OPEC+ Advances Plans to Delay Production Increases

OPEC+ delegates are working on an agreement to postpone oil-production increases by three months. The alliance is expected to finalize the deal during an online meeting this Thursday. If the delay is implemented, it could help stabilize prices as the group keeps output off the market to counteract global supply fluctuations.

Middle East Tensions Add Risk to Oil Markets

Geopolitical risks in the Middle East continue to influence markets. Recent U.S. sanctions on Iran coincide with escalating regional tensions, including Israel’s attack on a Hezbollah liaison in Syria. The ongoing Syrian conflict, coupled with Iraq’s proximity to the region, poses potential threats to flows. Analysts warn that further instability could significantly impact supply from key oil-producing nations.

Global Factors Supporting Oil Demand

In Asia, China’s economic planning for 2025, including potential stimulus measures, is expected to bolster crude demand. Meanwhile, in Brazil, non-OPEC supply growth has faltered, with output dropping 6% from the previous month and 8% year-over-year. These global factors contribute to an overall tighter supply outlook, supporting higher oil prices.

Oil Market Volatility and Future Outlook

Despite recent price gains, market volatility has eased, with implied volatility reaching a two-month low. WTI futures have remained within a $6 range since mid-October. Analysts suggest that U.S. sanctions, OPEC+ production strategies, and geopolitical risks will continue to shape oil price dynamics in the coming months.

Potential for Brent to Reach $80 Per Barrel

Analysts predict that prices could climb even higher if supply constraints intensify. Francisco Blanch, head of commodities research at Bank of America, stated that stricter sanctions on Iran and Venezuela could significantly reduce global output. Coupled with OPEC+ production cuts, these factors could push Brent crude into the $80-per-barrel range, highlighting the sensitivity of markets to geopolitical and policy shifts.