Forex Analysis & Reviews: 24.03.2025 - Financial wars: oil, gas,...

24.03.2025 01:39 PM

Financial wars: oil, gas, and sanctions in great power game

In the world of finance, every day is a battle for market dominance. Just as traders celebrate rising prices, the tides can turn in an instant. On Friday, natural gas futures surged, giving bulls something to cheer about, while crude oil failed to deliver a similar performance.

Once again, the New York Mercantile Exchange became the stage for sharp market moves. April futures on natural gas reminded traders of their potential, rising 0.48% to reach $3.99 per million BTUs. Although the session's high fell short of expectations, solid support at $3.866 and resistance at $4.259 reinforced confidence that the market had not made its final move yet.

Meanwhile, the US dollar index—measuring the greenback against a basket of six major currencies—also emerged as a winner. At the time of writing, the index was up 0.28%, reaching 103.79. For many traders, moves in the dollar index serve as a reliable signal: when the dollar strengthens, commodities like oil and gas tend to face pressure. But such conditions often create strategic entry points for savvy market participants.

WTI crude oil did not share the same momentum. On the NYMEX, May WTI futures slipped 0.40% to $68.34 per barrel. The European session added to the gloom, dragging the price down a further 0.07% to $68.02. Key support and resistance were holding at $66.09 and $68.61, respectively.

Brent futures traded on ICE were also under pressure, down 0.19% to $71.86 per barrel.

On Thursday, Washington added fuel to the fire by announcing fresh sanctions against China-bound Iranian oil shipments. The latest measures targeted independent refinery Shouguang Luqing Petrochemical and several vessels supplying Iranian crude to China. It marked the fourth wave of sanctions since February, when the US renewed its maximum pressure campaign against Tehran.

Due to increased shipping restrictions, Iranian oil is now reaching China via more complex and expensive routes. But Chinese traders appear largely unfazed. According to local sources, companies are simply reorganizing logistics and continuing to import.

February was a particularly strong month for Iran: Chinese imports of Iranian oil hit 1.43 million barrels per day, up sharply from 898,000 in January. Much of this oil, notably, is officially labeled as Malaysian crude, a testament to the creativity of global trade networks.

Throughout February and March, the US ramped up sanctions on Iran and Russia, with a clear focus on energy exports. While the sanctions aim to curb supply, they may also create trading opportunities for market participants willing to navigate the risks.

On February 4, 2025, President Donald Trump signed an executive order reinstating the maximum pressure policy on Iran. Just three weeks later, on February 24, another round of sanctions was announced blacklisting 30 individuals and tankers linked to Iran's oil sector. Then, on March 13, the list grew again with 13 more tankers and 18 additional companies and individuals added.

Yet Iran's oil production has proven resilient. Output in February remained steady at 4.8 million barrels per day, the same as January. This is a notable jump from 3.7 million barrels in January 2023, suggesting Iran has found ways to sidestep US restrictions.

The situation with Russian energy exports is also intensifying. Until March 12, foreign companies were allowed to purchase Russian oil and gas via sanctioned banks like Sberbank, VTB, Alfa-Bank, and Sovcombank. These transactions were enabled by a renewable general license that had been extended every two months. However, this time, the US chose not to renew the license.

Analysts, including those at CBS, do not expect the new measures to significantly impact Iranian or Russian oil exports in the short term. However, the political tension from Washington may lend support to oil prices. According to CBS estimates, ending the license could boost oil prices by $5 per barrel. Still, Brent saw only a modest increase between March 12 and 20, inching up from $70.9 to $71.1.

Should the US eventually ease restrictions on Russia's financial sector, payment issues related to Russian energy could become a thing of the past. But for now, that scenario remains a distant possibility.

Despite seemingly stable output figures, the oil market remains highly sensitive to geopolitical developments. Even modest price moves could open doors for long-term trading strategies.

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*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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