Oil holds strong despite slight dip, heads for weekly gain

March 28, 2025 (MLN): Oil prices eased a touch but held near one-month highs on Friday as they headed for a third weekly gain on a tightening global supply outlook after the U.S. imposed tariffs against countries buying oil from Venezuela and placed curbs on Iranian oil trade.

Brent crude futures decreased by $0.18, or 0.24%, to $73.85 per barrel. 

West Texas Intermediate (WTI) crude futures fell by $0.05, or 0.08%, to $69.79 per barrel by [11:30 am] PST.

The moves were minor compared with the gains of over 2% for both contracts so far this week. They are up more than 7% since hitting multi-month lows in early March.

The main driver of the price rally has been the shifting landscape of global oil sanctions, BMI analysts wrote in a market commentary, as Reuters reported.

U.S. President Donald Trump on Monday announced new 25% tariffs on potential buyers of Venezuelan crude, days after U.S. sanctions targeting China's imports from Iran.

The order added fresh uncertainty to buyers and saw trade of Venezuelan oil to top buyer China stall, as Reuters reported.

Elsewhere, sources said India's Reliance Industries, operator of the world's biggest refining complex, will halt Venezuelan oil imports.

"The potential loss of Venezuelan crude exports to the market due to secondary tariffs and the possibility of the same being imposed on Iranian barrels has caused an apparent tightness in crude supply," said June Goh, a senior oil analyst at Sparta Commodities.

Oil was also underpinned by signs of better demand in the U.S., the world's top oil consumer, as the country's crude stocks fell more than anticipated.

Data by the Energy Information Administration showed U.S. crude inventories fell by 3.3 million barrels to 433.6m barrels in the week ended March 21, compared with analysts' expectations in a Reuters poll for a 956,000-barrel draw.

The broader global dynamics for oil trade, however, pointed to a period of heightened uncertainty, as a blitz of U.S. tariffs against trading partner countries raises fears of a sharp economic downturn in a blow to oil demand.

As a result, analysts don't expect sharp gains in oil prices to be sustained in the current environment.

"While the market is suffering under extreme uncertainties, we are holding to our forecast for Brent crude to average $76 per barrel in 2025, down from $80 per barrel in 2024," the BMI analysts wrote.

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