Oil prices increased on Monday as US economic data last week indicated some resiliency, while investors are monitoring a series of central bank meetings this week.
In the Asian afternoon session, the US West Texas Intermediate (WTI) futures for January delivery rose 0.17% to $71.35. While Brent futures expiring in February climbed by 0.18% to $75.98 per barrel.
Crude prices tended to seven consecutive weeks of losses after lackluster output cuts by the Organization of Petroleum Exporting Countries and allies (OPEC+). China’s weak economic data have also fueled concerns over oil demand.
The benchmark drops have been limited by robust US nonfarm payroll data on Friday, which highlighted the labor market as one of the positive factors in the world’s largest fuel consumer.
The report reduced the possibility of early rate cuts from the Federal Reserve (Fed) reading. Still, it sparked optimism for crude demand outlook, particularly the prospect of a soft US economy landing.
The scenario was strengthened by the Department of Energy’s (DOE) plans to purchase 3 million barrels of oil to replenish the Strategic Petroleum Reserve (SPR), which has been depleted to a 40-year low in 2022.
Despite OPEC+ production curbs of 2.2 million barrels per day (bpd) in the first quarter, uncertainty about a supply decline persisted. Non-OPEC output growth is expected to result in excess supply next year.
RBC Capital Markets anticipates inventory draws of 700,000 bpd in the first half and only 140,000 bpd for the entire 2024.
Oil Market Braces for Central Banks and US Data
Despite the price increase, significant oil recovery was kept in check ahead of crucial central bank meetings and economic data releases this week.
The Fed will likely maintain interest rates, although traders will monitor the potential for next year’s rate cuts after recent signs of a robust labor market.
Following the US central bank meeting, inflation data for November will be released on Tuesday.
Interest rate decisions from the Bank of England (BoE), European Central Bank (ECB), and Swiss National Bank (SNB) are also due this week.
Tight global monetary conditions through 2024 are expected, curbing economic growth and dampening crude demand. Oil was constrained by such a concept this year, limiting any crucial upside from some OPEC+ production cuts.
Furthermore, the economic slowdown in China, the leading oil exporter, has been a significant source of contention. Recent data revealed that the country’s November oil imports hit a four-month low amid high supplies and subdued fuel demand.
