Oil is headed for a weekly gain as the prospect of tighter U.S. sanctions on Iran and Russia offset persistent concerns about a massive global oversupply next year.

West Texas Intermediate is trading near $70 a barrel, up about 4% so far this week, while Brent closed above $73. President-elect Donald Trump's pick for national security adviser has vowed to return to "maximum pressure" on Iran, while the Biden administration is considering new sanctions on Russian oil trade before leaving the White House next month.

The prospect of tougher penalties briefly sparked a bullish surge in the options market, with Brent and WTI biased toward calls at the close on Thursday. Implied oil volatility also jumped.

Meanwhile, Canada is examining the use of export taxes on key commodities it exports to the U.S. including uranium and oil if Trump follows through on his threat to impose hefty tariffs. However, such action would be a last resort, according to officials familiar with the discussions.

Oil is set for its first weekly gain in three weeks, but futures remain in a tight range where they have traded since mid-October. Global markets face a glut next year despite OPEC+'s recent decision to further delay restoring idled supplies, the International Energy Agency said in a report on Thursday.

Source: Bloomberg