Oil rises more than $1 a barrel on tighter supply outlook
Oil prices surged by over $1 per barrel on Thursday, concluding the month on a higher note due to several factors influencing the supply outlook. The rally was fueled by expectations of OPEC+ maintaining production cuts, persistent attacks on Russia’s energy facilities, and a decline in the U.S. rig count, all of which contributed to a tightening of crude oil supplies.
The May contracts for Brent crude futures settled at $87.48 per barrel, marking the highest level since October 27, with a gain of $1.39 or 1.6%. Similarly, the more actively traded June contract settled at $87 per barrel, rising by $1.58, while the May contract expired on Thursday. In the U.S., West Texas Intermediate (WTI) crude futures for May delivery settled at $83.17 per barrel, up by $1.82 or 2.2%.
For the week, Brent saw a rise of 2.4% and WTI gained approximately 3.2%, extending gains for the third consecutive month. Despite a slight setback in the previous session due to an unexpected increase in U.S. crude oil and gasoline inventories, the rise was mitigated by factors such as lower-than-expected inventory build-up and a global oil market indicating a slight deficit.
Analysts anticipate that U.S. inventories will continue to rise less than usual, supporting Brent crude oil prices moving forward. Additionally, increased U.S. refinery utilization rates and a decrease in the oil and gas rig count further buoyed prices.
On the economic front, the U.S. economy exhibited stronger-than-expected growth in the fourth quarter, with Gross Domestic Product (GDP) increasing at a 3.4% annualized rate. This positive economic outlook, coupled with inflation data, suggests that the Federal Reserve may delay cutting its short-term interest rate target, a move that typically bolsters oil demand.
Looking ahead, market participants are keenly awaiting cues from the upcoming meeting of the Joint Monitoring Ministerial Committee of OPEC. While geopolitical tensions have heightened expectations of potential supply disruptions, OPEC+ is unlikely to make immediate changes to oil output policies until a comprehensive ministerial gathering in June.
The recent attacks by Ukraine on Russian energy infrastructure have further underscored concerns about global crude supply tightening, providing additional support to oil prices. Despite calls from the Biden administration to refrain from such actions, the attacks have persisted, amplifying market sentiments regarding supply constraints.
In summary, oil prices surged on Thursday driven by multiple factors including OPEC+ dynamics, geopolitical tensions, and economic indicators, with market participants closely monitoring developments for future trends.
