Apr 1 2024: Oil prices climbed approximately 1% to reach a five-month high, driven by expectations of increased oil demand fueled by positive economic reports from the U.S. and China. The tightening of global supplies due to OPEC+ cuts and attacks on Russian refineries also contributed to the upward trend.
Brent futures surged by 73 cents, or 0.8%, reaching $87.73 per barrel, while U.S. West Texas Intermediate (WTI) crude rose by $1.04, or 1.3%, hitting $84.21. These prices marked the highest levels since October 27 for both contracts.
The rise in U.S. crude futures led to a decrease in the U.S. diesel crack spread, a measure of refining profit margins, which fell to its lowest point since May 2023 for the second consecutive day.
Positive economic data from the U.S., including a moderation in the personal consumption expenditures (PCE) price index and the possibility of a June interest rate cut by the Federal Reserve, contributed to the optimistic outlook for oil demand. Lower interest rates can stimulate economic growth and subsequently increase oil consumption.
In China, manufacturing activity expanded for the first time in six months in March, indicating growing oil demand in the world’s largest crude importer. This factor, along with China’s commitment to importing more high-quality products and services from France, contributed to the positive sentiment.
In Europe, oil demand exceeded expectations by rising 100,000 barrels per day (bpd) in February, contrary to the forecast of a 200,000 bpd contraction for 2024 by Goldman Sachs analysts.
Meanwhile, Saudi Arabia is considering raising the official selling price (OSP) for its flagship Arab Light crude in May, following strengthening Middle East benchmarks. In Russia, oil companies are focusing on reducing output rather than exports in the second quarter to align with production cuts agreed upon by OPEC+ members.
Drone attacks from Ukraine have disrupted several Russian refineries, impacting Russia’s fuel exports. Approximately 1 million barrels per day of Russian crude processing capacity is offline due to these attacks, affecting high-sulphur fuel oil exports processed at Chinese and Indian refineries.