Oil prices increased on Monday, extending recent gains due to expectations of tighter supply from OPEC+ cuts, attacks on Russian refineries, and positive Chinese manufacturing data that supported outlooks for improving demand.
Brent crude has increased by 24 cents, which is equivalent to 0.3%, and it is currently trading at $87.24 a barrel as of 0649 GMT. The commodity showed a positive momentum last week as it gained 2.4%. Similarly, U.S. West Texas Intermediate crude is trading at $83.45 a barrel, up by 28 cents or 0.3%. Last week, it surged by 3.2%.
Trade volumes will be thin on Monday as several countries close for the Easter holidays.
Both benchmarks finished higher for a third consecutive month in March, with Brent holding above $85 a barrel since the middle of last month. This is due to the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, pledging to extend production cuts to the end of June, which could tighten crude supply during summer in the Northern Hemisphere.
Russian Deputy Prime Minister, Alexander Novak, said on Friday that its oil companies will focus on reducing output rather than exports in the second quarter to evenly spread production cuts with other OPEC+ member countries.
Drone attacks from Ukraine have damaged several Russian refineries, which is expected to reduce Russia’s fuel exports.
“Geopolitical risks to crude and heavy feedstock supplies add to strong Q2 24 demand fundamentals,” said Energy Aspects analysts in a note.
Almost one million barrels per day (BPD) of Russian crude processing capacity is offline from the attacks, impacting its high-sulfur fuel oil exports which are processed at Chinese and Indian refineries, the consultancy added.
In Europe, oil demand was stronger than expected, rising 100,000 BPD on-year in February, Goldman Sachs analysts said, versus its forecast of a 200,000 BPD contraction in 2024.
Europe’s firm demand, and softness in US supply growth coupled with a possible extension of OPEC+ cuts through 2024 outweigh downside risk from persistent softness in China’s demand, they said in a note.
Crude oil production by the United States, the world’s largest producer, dropped 6% in January from December’s record high, following freezing weather, data from the Energy Information Administration showed on Friday.
“We see the risks to our forecast that Brent will average $83/bbl in 2024Q4 as skewed moderately to the upside,” the analysts said.
China’s official factory survey revealed that manufacturing activity expanded in March, marking the first time in six months. This development supports oil demand in the world’s largest crude importer, despite the property sector crisis that continues to hamper the economy. It is expected that this positive trend will enhance prices in the market.
Investors are also monitoring US economic data for signs of when the Federal Reserve will cut interest rates this year, which will support the global economy and oil demand.
WTI Long (Buy)
Enter At: 84.24
T.P_1: 85.46
T.P_2: 86.27
T.P_3: 87.03
T.P_4: 88.28
T.P_5: 89.55
T.P_6: 91.32
T.P_7: 93.10
T.P_8: 95.03
S.L: 75.27
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