Oil prices continued their upward momentum on Monday, bolstered by expectations of reduced supply from OPEC+ cuts and disruptions to Russian refineries, while upbeat Chinese manufacturing data further supported optimism regarding demand.
By 0830 GMT, Brent crude had risen by 25 cents, or 0.3%, reaching $87.25 a barrel, following a 2.4% gain last week. Meanwhile, U.S. West Texas Intermediate crude stood at $83.44 a barrel, up 27 cents, or 0.3%, after a robust 3.2% increase last week.
Trading volumes remained subdued due to Easter holidays observed in several countries.
Both benchmarks marked their third consecutive month of gains in March, with Brent maintaining levels above $85 a barrel since the middle of the month.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, reaffirmed their commitment to extend production cuts until the end of June, potentially tightening crude supply during the Northern Hemisphere’s summer.
Russian Deputy Prime Minister Alexander Novak announced on Friday that Russian oil companies would prioritize reducing output over exports in the second quarter to align with OPEC+ production cuts. Additionally, drone attacks originating from Ukraine have disrupted operations at several Russian refineries, further impacting Russia’s fuel exports.
Analysts at Energy Aspects highlighted geopolitical risks to crude and heavy feedstock supplies, emphasizing strong demand fundamentals for the second quarter. The consultancy estimated that nearly 1 million barrels per day (bpd) of Russian crude processing capacity is offline due to the attacks, affecting its high-sulfur fuel oil exports processed at 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, contrasting with their earlier forecast of a 200,000 bpd contraction in 2024. They noted that firm European demand and softness in U.S. supply growth, combined with the potential extension of OPEC+ cuts, outweigh downside risks from persistent softness in China’s demand.
Meanwhile, China’s official factory survey revealed that manufacturing activity expanded for the first time in six months in March, underscoring oil demand in the world’s largest crude importer, despite ongoing challenges in the property sector affecting the economy.
