Oil prices increased on Monday, extending recent gains fueled by expectations of tighter supply from OPEC+ cuts and geopolitical tensions. Meanwhile, upbeat Chinese manufacturing data provided further support to demand outlooks.
By 5:02 GMT, Brent crude saw a 0.30 percent increase to $87.26 after rising 2.4 percent last week. Meanwhile, U.S. West Texas Intermediate crude saw a 0.35 percent increase to $83.46, following a 3.2 percent increase last week.
OPEC+ commitments
The rally in oil prices comes in the wake of the Organization of the Petroleum Exporting Countries and their allies (OPEC+) reaffirming their commitment to production cuts. The organization pledged to extend cuts to the end of June, which could further tighten crude supply during summer in the northern hemisphere. Amid oil output cuts, both benchmarks ended the month higher for a third consecutive month in March, with Brent prices holding above the $85 a barrel mark since mid-March.
Geopolitical unrest raises supply concerns
Drone attacks targeting Russian refineries have further escalated supply concerns, disrupting Russia’s fuel exports and further supporting oil prices. The resulting outage of nearly 1 million barrels per day of Russian crude processing capacity has implications not only for global oil markets but also impacts the high-sulfur fuel oil exports processed in Chinese and Indian refineries. Energy Aspects analysts emphasize the geopolitical risks to crude and heavy feedstock supplies, enhancing the bullish outlook for demand in the second quarter of 2024.
European demand rises
In Europe, oil demand increased in February by 100,000 barrels per day year-on-year, Goldman Sachs analysts said, compared to the 200,000 barrels per day decline expected in 2024. Therefore Europe’s firm demand, soft U.S. supply growth, and a possible extension of OPEC+ cuts throughout 2024 outweighed the persistent soft Chinese demand, raising oil prices.
In January, crude oil production in the U.S. declined 6 percent from December’s record high, stated the Energy Information Administration. Moreover, the administration expects Brent prices to average $83 per barrel in the fourth quarter of the year.
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Chinese manufacturing rebound
China’s manufacturing activity expanded for the first time in six months in March, signaling a potential recovery in the world’s largest crude importer. Despite lingering concerns surrounding the property sector, the resilience of Chinese manufacturing bodes well for oil demand, further supporting crude prices. Moreover, investors are closely monitoring U.S. economic data for indications of potential interest rate cuts by the Federal Reserve, which could further bolster the global economy and oil demand.
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