On Friday, oil prices surged ahead of the Organization of the Petroleum Exporting Countries (OPEC+) decision on a supply deal for the second quarter despite the US and China’s demand uncertainties.
In the Asian afternoon session, Brent futures for May contracts increased by 0.02% to $81.93 a barrel.
Concurrently, West Texas Intermediate (WTI) futures ending in April rose by 0.35% to $78.53 per barrel. However, it later eased by -0.22% to $78.10 a barrel.
Furthermore, WTI is on course to climb about 2.50% this week, while Brent is bracing near the prior week’s settlement price. The UK-based benchmark has held comfortably at above $80.00 levels for three consecutive weeks.
According to analysts, Brent prices have remained relatively stable this week, trading horizontally. Despite the benchmark demonstrating resilience, the underlying fundamentals still lean towards an oversupply scenario.
Meanwhile, experts added that they anticipate extending OPEC+ production cuts into the second quarter of 2024, as expectations of ongoing soft demand influence sentiment. However, there is a widening of time spreads for Brent futures contracts.
Moreover, this shift towards stronger backwardation in market structure is seen as a factor supporting a more bullish stance on prices, with markets factoring in tightening conditions in the upcoming months.
Additionally, data revealed that OPEC has boosted production to 26.42 million barrels per day (bpd) this month, 90,000 bpd higher than the previous month. Meanwhile, Libyan output increased by 150,000 bpd on a month-on-month (MoM) basis.
Analysts noted the rising possibilities of Saudi-led OPEC+ extending supply cuts into late 2024, pushing oil prices past $80 a barrel.
US, China Data Awaits Hold Oil Prices Remain Tight
Backing up prices, the US personal consumption expenditures (PCE) index, favored by the Federal Reserve (Fed) as its primary inflation measure, indicated that January’s inflation aligns with economists’ predictions.
This maintains the possibility of a June interest rate reduction. Consequently, there is potential for a decrease in consumer expenses and a boost in fuel purchasing activity.
However, the fluctuating February data on China’s purchasing managers’ index (PMI), which gauges manufacturing activity in the leading global oil consumer, limited the upward price movement.
According to a Friday report, Beijing’s manufacturing activity experienced contraction for the fifth consecutive month.
This puts pressure on policymakers in China to implement additional stimulus measures, especially as factory owners face challenges securing orders.
