Oil prices experienced an increase on Tuesday, supported by indications of potential demand improvement in China and the United States, the two largest oil-consuming nations in the world. There are also growing concerns about an escalating conflict in the Middle East, which could impact the region’s oil supply.
Brent futures for June delivery rose by 41 cents to reach $87.83 per barrel as of 0440 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures for May increased by 41 cents to reach $84.12 per barrel. This follows the previous session’s highest closing price since October 27.
Read more: Oil prices rise amid tight supply, upbeat Chinese economic data
Accumulating bullish factors drive oil prices up
According to Yeap Jun Rong, an IG market strategist, the bullish factors supporting oil prices are accumulating. Strong economic conditions in China and the U.S. are providing a more positive outlook for oil demand. Additionally, escalating geopolitical tensions in the Middle East, especially with the involvement of Iran, are also contributing to price increases.
March witnessed manufacturing activity expanding in China for the first time in six months and in the U.S. for the first time in 1-1/2 years. These developments are expected to translate into increased oil demand throughout the year. China is the largest crude importer globally, while the U.S. holds the position of the largest consumer.
Moreover, oil prices were negatively impacted by escalating tension and conflict in the Middle East. NZ analysts noted that while the market has not been worried about supply disruptions so far, Iran’s involvement could put its oil supply at risk.
OPEC+ meeting to review output cuts compliance
On Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, will hold an online meeting of the Joint Ministerial Monitoring Committee to assess the market and review members’ compliance with output cuts. It is expected that members will maintain their current supply policy, which calls for voluntary output cuts of 2.2 million barrels per day until the end of the second quarter. OPEC’s output already decreased by 50,000 bpd last month, indicating some impact from the voluntary cuts.
The increased discipline in production cuts from OPEC+ members is being observed, and there is speculation that Russia may implement larger production cuts in the next three months instead of focusing on export cuts. Suvro Sarkar, DBS Bank’s energy sector team lead, mentioned that along with ongoing geopolitical risks, these factors could push oil prices towards $90 per barrel in the near term.
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