Oil prices climbed on Monday, extending recent gains fueled by expectations of tighter supply from OPEC+ cuts, disruptions to Russian refineries, and positive Chinese manufacturing data boosting demand outlooks.
Brent crude edged up by 24 cents, or 0.3%, to $87.24 a barrel by 0649 GMT, following a 2.4% increase last week. Meanwhile, U.S. West Texas Intermediate crude reached $83.45 a barrel, up 28 cents, or 0.3%, after a 3.2% gain last week.
Trading volumes are anticipated to be subdued on Monday due to Easter holiday closures in several countries.
Both benchmarks closed higher for the third consecutive month in March, with Brent remaining above $85 a barrel since mid-March. This follows the commitment by the Organization of the Petroleum Exporting Countries (OPEC) and their allies, known as OPEC+, to extend production cuts until the end of June, potentially tightening crude supply during the summer in the Northern Hemisphere.
Russian Deputy Prime Minister Alexander Novak announced on Friday that Russian oil companies would prioritize reducing output over exports in the second quarter, aiming to evenly distribute production cuts among OPEC+ members.
Drone attacks originating from Ukraine have disrupted several Russian refineries, leading to a reduction in Russia’s fuel exports.
According to analysts at Energy Aspects, geopolitical tensions affecting crude and heavy feedstock supplies, combined with robust demand fundamentals in the second quarter of 2024, contribute to upward pressure on prices.
Nearly 1 million barrels per day (bpd) of Russian crude processing capacity is offline due to the attacks, impacting high-sulfur fuel oil exports processed by Chinese and Indian refineries.
In Europe, oil demand exceeded expectations, rising by 100,000 bpd year-on-year in February, according to Goldman Sachs analysts. They anticipate a possible extension of OPEC+ cuts throughout 2024, offsetting downside risks from persistent softness in Chinese demand.
Data from the Energy Information Administration revealed a 6% drop in U.S. crude oil production in January from the previous month’s record high, attributed to severe weather conditions.
Supporting prices further, China’s official factory survey indicated the first expansion in manufacturing activity in six months in March, bolstering oil demand in the world’s largest crude importer despite ongoing challenges in the property sector.
Investors are closely monitoring U.S. economic indicators for signals regarding potential interest rate cuts by the Federal Reserve, which would bolster the global economy and oil demand.