Oil prices closed higher on Thursday due to OPEC-led supply cuts and the sanctions imposed by the United States to the exporters from Venezuela and Iran. The gains, however, were limited because of the falling stock market and the renewed concerns over the demand growth.
Brent crude futures gained a 0.47 percent increase as it settled to $66.30 per barrel. The United States Texas Intermediate (WTI) crude futures gained 44 cents as it closed to $56.66 a barrel.
Phil Flynn, an analyst at Price Futures Group in Chicago, said that the big picture is that short-term fundamentals are very strong and there's still some nervousness about supply. This year, the Organization of the Petroleum Exporting Countries and allies, including Russia, decided to cut output and tighten the oil market to support prices. The traders said that the sanctions imposed by the United States against the oil industries of Iran and Venezuela, that are members of OPEC, backed the gains of the futures.
The PDVSA, Venezuela's state-run oil company, declared a maritime emergency this week because they are troubled by accessing tankers and personnel to export its oil due to the United States sanctions.
In November, when the United States re-implemented the sanctions against Iran, oil buyers were allowed to purchase crude in a limited amount for 180 days after the United States granted waivers to eight Iranian oil buyers.
The sanctions were placed on Iran's crude products to pressure the governments to cut their imports of Iranian oil to zero. Importers, however, continued to propose talks to extend the waivers timeline.
According to sources in India, the country wants to continue importing Iranian oil at its current level which is about 300,000 barrels per day (bpd) while negotiating with the United States to extend the waiver for the sanctions until early May.
On Wednesday, the United States Energy Information Administration's data showed signs of strong demand for refined petroleum products.
However, the prices of crude in the market were pressured by the growing concern about the economy of Europe. The pressure pushed Wall Street lower and it also intensified the concern on the demand for oil globally.
The European Central Bank pushed out the timing of its post-crisis rate hike to next year at the earliest and offered banks new rounds of multi-year cash to stimulate a struggling eurozone economy.
Jim Ritterbush, president of Ritterbusch and Associates, said that mounting global oil demand concerns related to slowing world economic growth remains as a latent bearish consideration that will likely provide a limiter on near term upside progress.
