Oil prices kept a large part of their increases on Monday amid a tighter outlook from output cuts from the Organization of Petroleum of Exporting Countries (OPEC) and its allies, disruptions in Russian refineries, and expansion in China’s manufacturing activity.
Brent crude oil futures for June traded 0.32% higher at $87.28 per barrel after climbing 2.40% in the previous week. The US West Texas Intermediate (WTI) crude futures for May surged 0.36% to $83.47 per barrel, following a 3.20% rise last week.
Thin trading is expected to be observed on Monday as several countries close their respective markets in observance of the Easter Holiday.
Tighter Oil Supply Bets Persist
Brent and WTI ended March on a positive note for the third straight month, with the global oil benchmark staying above $85 per barrel since the middle of the month.
The strength was mainly driven by OPEC+ members opting for a continuation of existing production cuts through the second quarter ending June 30, potentially tightening supplies in the summer season for northern hemisphere countries.
Russian Deputy Prime Minister Alexander Novak stated on Friday that their oil firms would significantly focus on trimming production instead of exports in the second quarter to divide the reductions among other OPEC+ allies equally.
Russia is also likely to see fewer fuel exports of fuel after Ukraine’s drone attacks in March left several of the country’s refineries unable to operate.
Almost 1 million barrels per day (bpd) of Russian crude processing capacity was shut down amid the assault, according to analysts, weighing on the country’s high-sulfur fuel exports, which Chinese and Indian oil refineries process.
On the other hand, Goldman Sachs Group Inc. analysts said European oil demand showed resilience year over year in February, building 100,000 bpd in the period. The bank expects to see a decline of 200,000 bpd in 2024.
Europe’s steady demand, the US’s easing supply growth, and the prospect of the OPEC+ cuts staying through this year offset the downside risk from slowing demand growth in top crude importer China, the analysts stated.
However, the country’s latest manufacturing purchasing managers’ index (PMI) data on Sunday showed that activity in the sector increased to 50.8 in March from 49.1 in February, its first expansion since September.
The reading bolsters Chinese oil demand amid the ongoing real estate crisis, which continues to pressure the world’s second-largest economy.
Traders are also monitoring US economic reports for cues about the beginning of the Federal Reserve’s interest rate cuts in 2024, a move that could shore up the global economy and crude demand.
