Oil Prices Extend Gains on Possible Improvement in Demand

Oil prices extended gains on Friday and were on track for a positive week as China saw its crude imports rise in April, while geopolitical tensions in the Middle East showed little signs of abating.

Global benchmark Brent crude oil futures expiring in July surged 0.57% to $84.36 per barrel, while the US West Texas Intermediate (WTI) crude futures for delivery in the same month rose 0.47% to $79.17 per barrel.

Both benchmarks closed Thursday’s trading at a one-week high, with Brent settling at $83.88 per barrel and WTI at $79.26. The increases came as data from China and the US indicated stronger demand for the top two oil-consuming countries.

In the Middle East, meanwhile, hopes for a ceasefire between Israel and Hamas have progressively weakened.

Israel’s military has carried on with its attack on the Palestinian city of Rafah in Southern Gaza, despite Hamas saying the assault hurts talks of a truce and US President Joe Biden warning of ceasing certain weapons supplies to Israel if it continued with its plans for a full-scale ground operation in Rafah.

Oil Prices Set for a Solid Week on Signs of Better Demand

The two crude futures contracts are expected to climb around 2% each this week after a sharp decline last week.

An import surge in China is mainly propelling prices. Data from the General Administration of Customs (GAC) showed on Thursday that the world’s largest importer of crude oil imported 44.72 million metric tons or around 10.88 million barrels per day (bpd) in April.

The reading presented a 5.45% year-on-year jump from the 10.4 million bpd imported in April of last year and strengthened the prospect of continued stability in demand at home.

The country’s exports of refined oil products also returned to growth, rising 21.46% from the year prior to 4.55 million tons, signaling an improvement in domestic and overseas demand as Beijing takes action to better its unstable economic condition.

New fuel export quotas could also trigger some buying from Chinese refiners.

China reportedly set earlier in May more export quotas for this year’s refined oil products, issuing 18 million metric tons in the second batch, compared with the 19 million tons of fuel export quotas allocated in the first batch.

Further indicating better oil demand was data from the Energy Information Administration (EIA) showing US crude stockpiles dropped 1.36 million last week, with refining and fuel demand seen surging on increased travel during the summer season.

While gasoline and diesel demand in the country logged seasonal lows not seen since the pandemic, an easing dollar amid a possible slowdown in the US jobs market has kept crude prices up.