Sat, June 15, 2024

Oil Prices Rise by 0.4% on Hopes of Increased Demand

Oil prices

Quick Look:

  • China’s industrial output increased by 6.7% in April, signalling stronger future demand for oil.
  • Stabilization efforts by the government are expected to boost economic growth and oil prices.
  • Ukrainian drone attack on a Russian oil refinery led to market volatility.
  •  Falling oil and refined product inventories have supported prices.
  • Lower-than-expected US consumer price rise boosts hopes for lower interest rates and higher oil consumption.

Oil prices steadied on Friday, with Brent crude poised for its first weekly gain in three weeks. Economic indicators from China and the United States have bolstered hopes for higher demand, fuelling optimism in the market.

Oil Prices Rise: April Industrial Up 6.7% YoY

China reported a significant increase in industrial output, with a year-on-year rise of 6.7% in April, up from 4.5% in March. Therefore, this acceleration in manufacturing recovery signals stronger future demand for oil, a positive indicator for global markets.

The Chinese government announced major steps to stabilize the crisis-hit property sector. This move is expected to support economic growth, further driving oil and other commodities demand.

Ukrainian Drone Attack on Russian Oil Refinery

A Ukrainian drone attack targeted the Tuapse oil refinery in Russia, causing a fire that was quickly contained by authorities. Such geopolitical tensions often lead to volatility in oil markets, contributing to price fluctuations.

Recent declines in oil and refined product inventories have created optimism over future demand. This reversal of the rising stockpile trend has been a key factor in supporting oil prices.

U.S. consumer prices rose less than expected in April, boosting expectations of lower interest rates. This development could enhance economic activity and increase oil consumption.

OPEC+ Meeting on June 1 to Influence Oil Markets

Investors are looking towards the OPEC+ meeting on June 1 for further direction. The outcomes of this meeting could significantly influence oil market dynamics.

Price changes and Expert Insights

Brent Crude Oil:

  • Price: $83.14 per barrel
  • Change: -$0.13 (-0.2%)
  • Weekly Gain: +0.4%

U.S. West Texas Intermediate (WTI) Crude:

  • Price: $79.06 per barrel
  • Change: -$0.17 (-0.2%)
  • Weekly Gain: +1.0%

Tamas Varga, an oil broker at PVM, observed that the lack of explicit enthusiasm likely stems from tepid product demand, depressing refining margins. This highlights ongoing market challenges despite positive news.

Kelvin Wong, a senior market analyst at OANDA, noted several encouraging factors, including two consecutive weeks of decline in U.S. crude stockpiles and expectations of more economic stimulus measures from China. These factors contribute to a cautiously optimistic outlook for oil prices.

Economic Factors Influencing Oil Prices

Lower U.S. interest rates could help soften the dollar, making oil cheaper for investors holding other currencies. This scenario will likely increase oil demand, providing further support to prices.

While oil prices saw minor fluctuations on Friday, the overall trend for the week suggests a positive outlook driven by strong economic indicators and geopolitical developments. The market awaits further guidance from the upcoming OPEC+ meeting, which will be crucial in shaping future price movements.

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