March 29, 2024 (MLN): Global oil prices settled Thursday’s trading session with a gain of over 1.5% on the expectations that OPEC+ would stick to production cuts, coupled with the ongoing attacks on Russia's energy infrastructure.
Brent crude closed at $86.71 per barrel, up 1.5% from Wednesday’s close.
while West Texas Intermediate crude (WTI) settled at $82.67 per barrel, up 1.62% DoD.
In the prior session, oil prices had come under pressure from last week's unexpected rise in U.S. crude oil and gasoline inventories, driven by an increase in crude imports and sluggish gasoline demand, according to Energy Information Administration data, as Reuters reported.
However, the crude stock increase was smaller than the build projected by the American Petroleum Institute, and analysts noted the increase was lower than expected for the time of year.
U.S. refinery utilization rates, which rose 0.9 percentage points last week, also supported prices.
The oil and gas rig count, an early indicator of future output, also fell by three to 621 in the week to March 28, according to energy services firm Baker Hughes.
The U.S. economy, meanwhile, grew faster than previously estimated in the fourth quarter. Gross domestic product increased at a 3.4% annualized rate from the previously reported 3.2% pace, the Commerce Department's Bureau of Economic Analysis said.
"The strength in the stock market suggests strong forward earnings that are, in turn, hinting at a surprisingly strong US economy conducive toward better than expected energy product demand," said Jim Ritterbusch of energy consultancy Ritterbusch and Associates.
Inflation data also affirmed the case for the U.S. Federal Reserve to hold off on cutting its short-term interest rate target, a Fed governor said on Wednesday, but he did not rule out trimming rates later in the year.
"The market is converging on a June start to cuts for both the Fed and the European Central Bank," JPMorgan analysts said in a note. Lower interest rates typically support oil demand.
Investors will watch for cues from a meeting next week of the Joint Monitoring Ministerial Committee of producer group the Organization of Petroleum Exporting Countries (OPEC).
Increased geopolitical risk has raised expectations of possible supply disruption, but OPEC+ is unlikely to make any oil output policy changes until a full ministerial gathering in June.
Attacks by Ukraine on Russian energy infrastructure have also boosted the sentiment around global crude supplies tightening and helped to support oil prices, said Again Capital LLC partner John Kilduff.
"It's a prime target, and they appear to have not heeded the ask by the Biden administration to not attack Russian energy infrastructure," Kilduff said.
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Posted on: 2024-03-29T11:36:00+05:00
