Expectations of lower Russian oil supply in the near term provided some support to oil prices
Oil prices recovered some of the previous session’s more than 1 percent losses on Friday as prospects of a ceasefire deal between Ukraine and Russia, which would have brought back additional Russian energy supplies, diminished.
Brent crude futures rose 0.67 percent to $70.35 per barrel as of 6:26 GMT after settling 1.5 percent lower in the previous session. Meanwhile, U.S. West Texas Intermediate crude gained 0.71 percent to $67.02 after closing 1.7 percent lower on Thursday.
Russia-Ukraine deal prospects slump
Russian President Vladimir Putin said on Thursday that Moscow supported a U.S. proposal for a ceasefire in Ukraine in principle, but sought several clarifications and conditions that will likely extend the war further. Russia’s conditional support of a 30-day ceasefire proposal with Ukraine has reduced confidence surrounding reaching a deal in the short term.
Meanwhile, the global trade war that has hit financial markets and raised recession fears is escalating further with U.S. President Donald Trump threatening on Thursday to slap a 200 percent tariff on wine, cognac and other alcohol imports from Europe. Trump’s tariffs are expected to fuel inflation and economic uncertainty and may trigger another wave of market turbulence.
Trade war concerns and demand worries heavily impacted oil prices in the previous session. However, expectations of lower Russian oil supply in the near term provided some support to prices on Friday.
Oil supply to surpass demand this year
The International Energy Agency warned on Thursday that global oil supply may surpass demand by around 600,000 barrels per day this year due to growth led by the United States and weaker-than-expected global demand. Meanwhile, demand growth is forecast at 1.03 million barrels per day, 70,000 barrels per day lower than last month’s estimate.
“The macroeconomic conditions that underpin our oil demand projections deteriorated over the past month as trade tensions escalated between the U.S. and several other countries,” the IEA said. This prompted the agency to reduce its demand growth estimates for the fourth quarter of 2024 and the first quarter of 2025.
OPEC+ production grows amid demand concerns
Meanwhile, the Organization of Petroleum Exporting Countries and allies (OPEC+) reported in a monthly update on Wednesday that its oil production increased by 363,000 barrels per day to 41.01 million barrels per day in February, as the group begins to phase out nearly two years of production cuts. February’s increase was primarily driven by Kazakhstan and comes as the group gears up to further boost production in April.
Nevertheless, OPEC’s plans for greater production have intensified worries that oil markets might become oversaturated, even as a cooling global economy could potentially dampen demand. Yet, the group kept its forecast for demand growth—set at 1.45 million barrels per day in 2025—unchanged from the previous month, asserting that it anticipates the global economy to adapt to rising trade tariffs.
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U.S. imposes new sanctions on Iran’s oil minister
On Thursday, the U.S. imposed new sanctions targeting Iran’s oil minister as part of its ongoing “maximum pressure” campaign against Tehran. The sanctions also extend to several Hong Kong-flagged vessels involved in Iran’s shadow fleet, which helps conceal oil shipments, according to the U.S. Treasury Department.
It also designated the Panama-flagged Corona Fun, which the Treasury said has manipulated automatic identification systems to disguise efforts to ship Iranian oil, and the San Marino-flagged Seasky, for transporting oil on behalf of Iran’s national oil company to China.
These sanctions block U.S. assets of the designated entities and prohibit Americans from engaging in any transactions with them. Despite this development, crude oil remained under pressure in the previous session due to broader macroeconomic concerns.
