Investing.com-- Oil prices steadied in Asian trade on Thursday after clocking steep losses earlier this week on concerns over increasing supply and worsening demand, with new U.S. sanctions on Iran offering some price support.

Trading volumes were muted on account of Labor Day holidays across the globe, with oil expected to tread water for the rest of the day.

Prices were battered by heightened concerns over slowing demand, especially as data showed an unexpected contraction in the U.S. economy through the first quarter. Uncertainty over President Donald Trump’s trade policies also kept the outlook for demand subdued.

Brent oil futures for July rose 0.2% to $61.16 a barrel, while West Texas Intermediate crude futures rose 0.1% to $57.68 a barrel by 22:08 ET (02:08 GMT).

US sanctions more Iran oil ahead of nuclear talks

The U.S. on Wednesday imposed more sanctions against entities it alleged were involved in the illegal trade and transport of Iranian oil, likely putting more pressure on Tehran before a new round of negotiations on Iran’s nuclear plans this week.

The U.S. State Department said it was imposing sanctions on seven entities spread across the United Arab Emirates, Turkey, and Iran, which it said were trading Iranian oil and oil products.

The move is aimed at further limiting Iran’s ability to sell oil- its key export, and presents more economic pressure on the country.

But the new sanctions also stand to reduce global oil supplies, offering markets some relief amid heightened concerns over slowing demand and increasing supplies elsewhere.

Still, any positive developments in U.S.-Iran talks could see the eventual scaling back of sanctions against Tehran, freeing up its oil supplies.

Demand fears, trade uncertainty spark steep oil losses

Oil prices were nursing steep losses this week, especially as gross domestic product data showed the U.S. economy shrank in the first quarter.

Brent and WTI prices were trading down between 7% and 9% so far this week.

The GDP contraction was largely linked to uncertainty over Trump’s trade and economic agenda, and was yet to reflect the full impact of Trump’s steep trade tariffs- especially a 145% duty on China.

Hotter-than-expected PCE price index data- a key inflation gauge- also drummed up concerns over the U.S. economic outlook.

Weak purchasing managers index data from China also weighed, given that it showed a contraction in manufacturing activity in April. This was largely attributed to Trump’s tariffs.

China is the world’s biggest oil importer, with more economic headwinds for the country being a major pain point for oil markets.