Oil Prices Slip Slightly Amid Expectations of Tighter Supply
Oil prices edged down slightly on Monday, holding on to most of their recent gains amid expectations of tighter supply from OPEC+ cuts, attacks on Russian refineries, and upbeat Chinese manufacturing data.
Crude prices fell 17 cents, or 0.2%, to $86.83 a barrel by 0017 GMT after rising 2.4% last week. U.S. West Texas Intermediate crude was at $83.06 a barrel, down 11 cents, or 0.1%, following a 3.2% gain last week.
Trade volumes are expected to be thin on Monday as several countries are closed for Easter holiday.
OPEC+ Cuts and Russian Refinery Attacks Impact Oil Supply
Both benchmarks finished higher for a third consecutive month, with Brent holding above $85 a barrel since mid-March. The Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, pledged to extend production cuts to the end of June, potentially tightening crude supply during the summer in the northern hemisphere.
Russian Deputy Prime Minister Alexander Novak stated that Russian oil companies will reduce output in the second quarter, focusing on spreading production cuts evenly with other OPEC+ members rather than exports.
Drone attacks on Russian refineries have disrupted operations, leading to a reduction in Russia’s fuel exports.
Geopolitical Risks and Supply Disruptions
Energy Aspects analysts highlighted the geopolitical risks to crude and heavy feedstock supplies, emphasizing strong demand fundamentals for Q2 24. Almost 1 million barrels per day of Russian crude processing capacity is offline due to the attacks, impacting high-sulphur fuel oil exports to Chinese and Indian refineries.
European oil demand exceeded expectations, rising by 100,000 bpd on year in February, contrary to the forecast of a 200,000 bpd contraction in 2024, according to Goldman Sachs analysts.
China’s Manufacturing Activity and U.S. Economic Data
China’s manufacturing activity expanded in March for the first time in six months, supporting oil demand in the world’s largest crude importer. Investors are monitoring U.S. economic data for signals on potential Federal Reserve interest rate cuts to bolster the global economy and oil demand.
