Oil prices extended their rally for the third consecutive session on Thursday, with Brent crude climbing above $72 per barrel, following new U.S. sanctions targeting a Chinese refinery accused of processing Iranian crude in violation of international restrictions.
The U.S. Treasury Department announced sanctions against China’s Zhejiang Petroleum & Chemical Co. Ltd (ZPC), one of Asia’s largest refiners, and its chief executive, citing persistent violations of existing restrictions on Iranian oil.
The move marks the Biden administration’s latest effort to tighten enforcement of sanctions aimed at curbing Iran’s oil revenue.
The sanctions triggered a fresh wave of supply concerns across the market, prompting a risk premium on crude benchmarks.
Brent, against which Nigerian crude oil is measured, rose as high as $72.38 before settling at $72.06 per barrel in late afternoon trading, while West Texas Intermediate (WTI) climbed to $68.12.
According to market analysts, the action underscores growing geopolitical tensions and reinforces the U.S.’s commitment to limiting Iran’s ability to fund its nuclear program and regional proxies through crude exports.
“This is a significant signal to global buyers that the U.S. is returning to active enforcement of oil sanctions,” said Edward Morse, head of commodities research at Citigroup. “It also introduces potential trade disruptions across key Asian markets.”
The sanctions also apply secondary pressure on global refiners that have maintained business relationships with Tehran despite previous warnings.
Industry sources suggest that additional penalties could follow if other firms continue to purchase Iranian crude via indirect channels.
The development comes at a time when oil markets are already navigating tightening supply conditions due to extended production cuts by OPEC+ and continued geopolitical instability in the Middle East.
Analysts expect further price support if tensions between the U.S., China, and Iran escalate in the coming weeks.
On the supply side, traders are also monitoring signs of slowing output growth in non-OPEC countries. U.S. crude production has shown signs of plateauing in recent weeks, while Canadian and North Sea output remain below pre-pandemic levels.
Meanwhile, data from the U.S. Energy Information Administration (EIA) showed a 2.1 million barrel drawdown in commercial crude inventories last week, further reinforcing the bullish sentiment in the market.
Chinese authorities have not yet issued an official response to the sanctions. However, previous actions targeting state-linked firms have strained diplomatic ties between Washington and Beijing, with potential implications for broader trade negotiations and energy cooperation.
As the market digests the geopolitical risks, volatility is expected to remain elevated. Institutional investors are beginning to reprice their oil exposure, with hedge funds increasing long positions across both Brent and WTI futures.
Brent crude has now gained over 9% in the last three weeks, recovering from earlier losses driven by macroeconomic uncertainty and demand softness in key import markets. Should the trend persist, oil markets may begin pricing in a higher risk environment going into the second quarter.
