LONDON: Oil prices extended gains on Thursday on the prospect of tighter supply after Washington imposed further sanctions to curb Iranian oil trade and as some OPEC producers pledged more output cuts to compensate for pumping above agreed quotas.

Brent crude futures rose 56 cents, or 0.85 percent, to $66.41 a barrel by 9:25 a.m. Saudi time and US West Texas Intermediate crude was at $63.12 a barrel, up 65 cents, or 1.04 percent. 

Both benchmarks settled 2 percent higher on Wednesday at their highest levels since April 3 and are on track for their first weekly rise in three. 

Thursday is the last settlement day of the week ahead of the Good Friday and Easter holidays.

“I think the rally has a couple of factors behind it — short-covering, the weaker USD, which makes crude oil cheaper to buy, and the US pressure on Iran,” IG market analyst Tony Sycamore said.

WTI could rise back to $65-$67 a barrel but may struggle with further gains, he said.

“If we assume that US growth is going to be flat at best for the next two quarters and Chinese GDP (gross domestic product) is set to slow to somewhere between the 3 percent-4 percent band, it’s not good for crude oil,” Sycamore said.

President Donald Trump’s administration issued new sanctions targeting Iran’s oil exports on Wednesday, including against a China-based “teapot” oil refinery, ramping up pressure on Tehran amid talks on the country’s escalating nuclear program.

Adding to supply concerns, the Organization of the Petroleum Exporting Countries said on Wednesday it had received updated plans for Iraq, Kazakhstan and other countries to make further output cuts to compensate for pumping above quotas.

“(These factors) certainly could have affected sentiment – would argue that Iranian production (is) not significant and that OPEC quotas more often breached than observed, but both factors fed into the more bullish tone,” said Michael McCarthy, CEO of online investment platform Moomoo.

Big draws on US gasoline and distillates stocks and a smaller-than-expected gain in weekly crude inventories also bolstered markets, he said.

“Much of the recent selling pressure in global crude markets related to fears of an imminent flood of US oil, but the drop in refining suggests that bottlenecks to supply may be emerging,” McCarthy said.

Still, OPEC, the International Energy Agency and several banks, including Goldman Sachs and JP Morgan, cut forecasts on oil prices and demand growth this week as US tariffs and retaliation from other countries threw global trade into disarray.

The World Trade Organization said it expected trade in goods to fall by 0.2 percent this year, down from its expectation in October of a 3.0 percent expansion.