By Shariq Khan
(Reuters) -Oil prices edged higher on Monday as fresh U.S. sanctions on Iran and a commitment to compensate for overproduction by Iraq added to concerns of near-term supply tightness, helping the market recover some of Friday’s steep losses.
Brent crude futures were up 45 cents, or 0.6%, to $74.88 a barrel by 1:39 p.m. EST (1839 GMT), after closing at their lowest since February 6 on Friday. U.S. West Texas Intermediate crude futures were up 43 cents, or 0.6%, to $70.83, recovering from their lowest settlement so far this year in the prior session.
The U.S. Treasury imposed a fresh round of sanctions targeting Iran’s oil industry on Monday, hitting brokers, tanker operators, and shippers for their role in selling and transporting Iranian petroleum.
That might have had a modest impact on oil prices, along with the Iraqi oil ministry’s reaffirmation of its commitment to the OPEC+ group’s supply agreement, UBS analyst Giovanni Staunovo said.
He cautioned, however, that Iranian crude oil exports remain elevated. “Time will tell if (the sanctions) impact exports,” he said.
Meanwhile, Iraq said it would present an updated plan to compensate for any overproduction of its OPEC+ production quotas in recent months. Iraq on Sunday said it will export 185,000 barrels per day from Kurdistan’s oilfields through the Iraq-Turkey pipeline once oil shipments resume.
Oil prices were bound to recover from the prior session’s steep selloff, when expectations of the resumption in northern Iraqi exports and of an end to the war in Ukraine pulled benchmarks more than $2 lower, Commodity Context analyst Rory Johnston said.
The market structure has also flashed signs of near-term supply tightness in recent sessions, he added. The premium of front-month Brent futures over the next month’s contract was at its highest on Monday since February 11, having climbed steadily over the past week.
However, others cautioned oil prices could come under pressure again in upcoming sessions as talks to end the Ukraine war could allow more Russian oil onto the market, and a slew of U.S. tariff measures might weigh on economic activity and crude oil demand.
U.S. President Donald Trump said on Monday that the United States is close to a minerals deal with Ukraine as he and French President Emmanuel Macron held talks that covered the prospects for ending the Ukraine war despite stark differences on how to proceed.
“We’re just clearing out room to trade lower and I would be cautious if I was a buyer in the market today,” Mizuho analyst Robert Yawger said.
“Just sitting here, waiting for the next big event to happen, and obviously there are plenty of big ones out there that could hit any moment.”
(Reporting by Anna HirtensteinAdditional reporting by Mohi Narayan and Emily Chow; Editing by David Goodman, Sharon Singleton and Bill Berkrot)
