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Investing.com - Oil prices edged lower in European trading on Tuesday, reversing earlier gains that stemmed from the U.S. government’s imposition of new sanctions targeting Iran’s oil industry.
Brent oil futures had slipped 0.7% to $73.81 per barrel as of 08:06 ET (13:06 GMT), while West Texas Intermediate crude futures fell 0.7% to $70.22 a barrel.
U.S. sanctions on Iran spark supply concerns
The sanctions, announced by the Treasury Department, aim to intensify economic pressure on Iran by targeting over 30 entities and individuals involved in the country’s oil supply chain, including brokers and tanker operators in the United Arab Emirates, Hong Kong, and China.
The action is part of President Donald Trump’s "maximum pressure" campaign, explicitly aiming to halt Iran’s petroleum exports, particularly to major consumers like China.
Treasury Secretary Scott Bessent emphasized the administration’s commitment to using all available tools to target Iran’s oil supply chain, warning of significant sanctions risks for those dealing in Iranian oil.
In response to these developments, oil futures experienced modest gains on Monday. The market’s reaction reflected concerns over potential foreign supply constraints due to the new sanctions on Iran.
Markets uncertain amid complex supply-demand scenario
Despite the upward pressure from the sanctions, the overall outlook for oil prices remains uncertain.
Potential cease-fire agreements between Russia-Ukraine and Israel-Hamas could alleviate some market fears, potentially offsetting price increases.
Media reports have shown that OPEC and its allies, collectively known as OPEC+, are contemplating further delays in increasing oil production due to persistently weak demand and rising output from non-member countries.
Originally, the group planned to ease production cuts starting in April 2025, but this timeline has been postponed multiple times, with the latest adjustment pushing the start to April 2025.
These potential production delays are expected to support oil prices by limiting supply. However, the global oil market is projected to return to a surplus in 2025, despite OPEC+ extending supply cuts, which could lead to lower prices in the coming year.
Additionally, the resumption of Iraqi oil exports from the Kurdish region may influence supply dynamics.
(Scott Kanowsky contributed reporting.)