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Oil prices saw a notable increase on Friday, extending the sharp gains from the previous session, driven by drone attacks on Iraqi oil fields and fresh sanctions from the European Union (EU) on Russia.
As of 08:10 ET (12:10 GMT), Brent Oil Futures for September delivery rose 1.6% to $70.60 per barrel, while West Texas Intermediate (WTI) crude futures gained 1.8% to $68.73 per barrel.
EU Imposes New Sanctions on Russia
Oil prices gained momentum after the European Union agreed to its 18th sanctions package against Russia in response to its ongoing war in Ukraine. The new sanctions include measures targeting Russia’s oil and energy industries, aiming to intensify pressure on Moscow amid stalled peace talks.
As part of the sanctions package, the G7 nations will lower the price cap on Russian oil exports, further tightening the economic noose on Russia’s energy sector. This move comes at a time when the EU and other Western nations are attempting to manage the ongoing geopolitical uncertainty linked to Russia’s invasion of Ukraine.
Investors are also awaiting potential announcements from the U.S. regarding additional sanctions. Earlier this week, President Donald Trump warned that the U.S. would impose sanctions on countries that continue to buy Russian oil unless Moscow agrees to a peace deal within the next 50 days.
Supply Concerns from Drone Attacks on Iraqi Oil Fields
Crude oil prices also found support on Thursday due to concerns over potential supply disruptions caused by drone attacks on oil fields in Iraqi Kurdistan, reportedly carried out by Iran-backed militias. These attacks have raised concerns about the stability of oil supplies from the region, further propelling prices higher.
However, Iraq’s federal government recently announced a deal to resume crude exports from the Kurdistan region to Turkey, which had been suspended for two years. While confirmation from the Kurdistan Regional Government is still pending, this move signals potential progress in negotiations between Baghdad and Erbil.
Market Tightness Signals Support for Prices
In addition to geopolitical factors, tightening oil market conditions also supported higher prices. Data from the U.S. Energy Information Administration (EIA) revealed that U.S. crude oil inventories fell by 3.9 million barrels in the past week, significantly exceeding the market expectation of a 1.8 million-barrel decrease. This decline points to a tightening supply, bolstering market sentiment.
Furthermore, the Organization of the Petroleum Exporting Countries (OPEC) maintained its oil demand forecast for 2025 and 2026, expressing optimism that global trade tensions will ease. Despite OPEC+ raising production output by more than anticipated, the International Energy Agency (IEA) noted that the world’s oil market may still be tighter than it appears, especially with refineries ramping up processing to meet summer travel demand.
Outlook
Despite the higher-than-expected output hike by OPEC+, the ongoing geopolitical uncertainties, coupled with tightening market conditions and higher demand due to seasonal factors, are likely to support oil prices in the short to medium term. As investors continue to monitor the evolving geopolitical landscape, including Russia’s war in Ukraine and potential U.S. sanctions, market volatility is expected to remain a key driver of oil price movements.
