Oil prices declined slightly on Friday, securing a second consecutive week of gains as fresh U.S. sanctions on Iran and new OPEC+ output cut plans fueled expectations of tighter supply. Brent crude dropped 0.17% to $71.59 per barrel while WTI declined 0.42% to $68.20, with both benchmarks on track for their largest weekly increases since early January 2025.
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In a significant policy shift, the U.S. Treasury announced its fourth round of Iran-related sanctions on Thursday, for the first time targeting an independent Chinese refiner among other entities involved in transporting Iranian crude to China. Analysts at RBC Capital Markets called this "a clear escalation in sanctions policy," noting that "while the physical implications are minimal, we think it reasonable that risk premium here is taken more seriously."
OPEC+ Compliance Plans Bolster Prices
Oil received additional support from OPEC+'s new compensation mechanism announced Thursday, requiring seven members to further cut output to make up for exceeding agreed production levels. The plan would represent monthly cuts between 189,000 and 435,000 barrels per day, extending until June 2026.
Geopolitical Tensions Add Support
Middle East tensions continue to support crude prices, with Hamas launching rockets at Tel Aviv following three days of Israeli assaults on Gaza. "The prospect of an extended U.S. campaign against the Houthis combines with Israel's renewed Gaza offensive to put oil squarely back in the spotlight," noted IG's Chris Beauchamp.
Analyst Perspective
Despite these bullish factors, analysts remain cautious about OPEC+'s ability to implement the compensation mechanism effectively. "While the group shares a plan for compensation cuts, it certainly doesn't mean members will follow it. A handful of members have consistently produced above their target production levels," ING analysts noted, highlighting that the cartel has had little success with compliance since introducing the mechanism five years ago.
Oil's weekly gain comes against the backdrop of U.S. political developments, as energy executives met with President Trump on Wednesday to discuss permitting acceleration rather than falling crude prices, which have declined from $75.89 to $67.16 since Trump returned to the White House.
OIL.WTI (D1 Interval)
OIL.WTI price is approaching the 23.6% Fibonacci retracement level, which previously acted as support during the downtrend. Bulls will target resistance around the 38.2% Fibonacci retracement level, while bears will aim for a retest of November’s lows. The RSI is forming a bullish divergence, with resistance around the 51 level. Meanwhile, the MACD is on track to make a higher high after a bullish crossover.
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