Oil prices rose on Monday, adding to recent gains amid expectations of tighter supply from OPEC+ cuts, attacks on Russian refineries and as upbeat Chinese manufacturing data supported outlooks for improving demand.
Brent crude rose 29 cents, or 0.3%, to $87.29 a barrel by 0331 GMT after rising 2.4% last week. U.S. West Texas Intermediate crude was at $83.48 a barrel, up 31 cents, or 0.4%, following a 3.2% gain last week.
Trade volumes are expected to be thin on Monday as several countries are closed for 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, as the Organization of the Petroleum Exporting Countries (OPEC) and their allies, a group known as OPEC+, pledged 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 in order to evenly spread production cuts with other OPEC+ member countries.
Drone attacks from Ukraine have knocked out 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,” Energy Aspects analysts said in a note.
Almost 1 million barrels per day (bpd) of Russian crude processing capacity is offline from the attacks, impacting its high-sulphur fuel oil exports which are processed at Chinese and Indian refineries, the consultancy added.
In Europe, oil demand was firmer 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, softness in U.S. 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.
Also supportive for prices, China’s manufacturing activity expanded for the first time in six months in March, an official factory survey showed on Sunday, supporting oil demand at the world’s largest crude importer, even as a crisis in the property sector remains a drag on the economy.
Investors are also scouring U.S. economic data for signs of when the Federal Reserve will cut interest rates this year which will support the global economy and oil demand.
(Reporting by Florence Tan and Sudarshan Varadhan; Editing by Himani Sarkar and Christian Schmollinger)