Oil up over 1% following sanctions on Iran, US inventory decline
Onome Amuge
Oil prices continued their upward trajectory on Wednesday, building on the previous day’s gains as the market absorbed some factors, including fresh US sanctions on Iran, a notable decline in US crude inventories, and a more conciliatory stance from President Donald Trump regarding the Federal Reserve.
Brent crude futures gained $1, or 1.5 per cent, to settle at $68.44 a barrel by mid-morning in London. Simultaneously, US West Texas Intermediate crude climbed by 99 cents, or 1.6 per cent, reaching $64.66 a barrel.
The latest upward pressure stems in part from Washington’s decision on Tuesday to impose new sanctions targeting Iran’s energy sector. The measures specifically target Seyed Asadoollah Emamjomeh, a key figure in Iranian liquefied petroleum gas (LPG) and crude oil shipping, along with his associated corporate network.
According to a statement from the US Treasury, Emamjomeh’s network has been instrumental in facilitating the shipment of hundreds of millions of dollars’ worth of Iranian LPG and crude oil to international markets.
“The U.S. issued fresh sanctions targeting Iranian energy supplies, which worried markets,” commented Priyanka Sachdeva, senior market analyst at Phillip Nova.
Adding to the bullish sentiment, both benchmark contracts found support in growing optimism surrounding potential progress in trade negotiations between the US and China.
President Trump appeared to soften his rhetoric on Tuesday, backing away from earlier threats to dismiss Federal Reserve Chair Jerome Powell following days of criticism over the central bank’s stance on interest rates. In a further signal of potential de-escalation, Mr. Trump also hinted at the possibility of reducing tariffs on Chinese imports.
“Both benchmark prices this morning were also backed by hopes of a positive outcome between the U.S. and China over import tariffs,” Sachdeva noted. This is as Trump told reporters that he intended to be nice in upcoming discussions with Beijing and suggested that tariffs would be significantly reduced following a trade agreement, although not eliminated entirely.
However, US Treasury Secretary Scott Bessent cautioned that while he anticipated a de-escalation in US-China trade tensions, formal negotiations had yet to commence and were expected to be a protracted process. Bessent’s remarks were reportedly made during a closed-door presentation to investors at a JP Morgan conference.
Meanwhile, data from the American Petroleum Institute (API) released on Tuesday indicated a drawdown in US crude oil inventories, falling by approximately 4.6 million barrels last week, according to market sources. This unexpected decline further contributed to the upward momentum in prices.
Concerns surrounding the impact of ongoing trade disputes on global economic growth have previously weighed on crude futures, highlighting the market’s sensitivity to any signals of potential resolution.