It closed the month with an increase, as OPEC+ continued its course on production cuts, Ukraine’s ongoing attacks on Russia’s energy infrastructure, and the decrease in the number of drilling rigs in the United States, which narrowed the supply of crude oil. Oil prices rose more than $1 per barrel on Thursday.
May Brent crude oil futures rose $1.39, or 1.6%, to $87.48 a barrel, the highest level since Oct. 27. The more actively traded June contract rose $1.58 to settle at $87 a barrel, and the May contract expires Thursday.
Over the week, Brent rose 2.4% while WTI gained about 3.2%. Both indicators finished higher for the third consecutive month.
According to Energy Information Administration (EIA) data, oil prices in the previous session were under pressure due to the unexpected increase in US crude oil and gasoline stocks last week, caused by the increase in crude imports and stagnant gasoline demand.
However, the crude stock increase was smaller than the increase predicted by the American Petroleum Institute (API), and analysts emphasized that the increase was lower than expected for this period of the year.
US inventories are expected to rise less than usual due to the global oil market being in a slight deficit, which will likely provide support to the Brent crude oil price going forward.
US refinery utilization rates, which increased by 0.9 points last week, also supported prices.
The number of oil and gas rigs, an early indicator of future production, also fell by three to 621 in the week to March 28, according to Baker Hughes.
Meanwhile, the U.S. economy grew faster than previously estimated in the fourth quarter. Gross domestic product increased by 3.4% year-on-year, down from a previously reported increase of 3.2%.
The stock market is pointing to strong forward earnings, indicating that a strong U.S. economy is leading to better-than-expected demand for energy products.
Inflation data confirms the possibility that the US Federal Reserve will postpone lowering its short-term interest rate target. Still, we should not ignore the possibility that interest rates may be reduced later in the year. The market is weighing the possibility of cuts for both the Fed and the European Central Bank in early June.
Low-interest rates generally support oil demand.
Investors will be looking for future clues from next week’s meeting of the Joint Monitoring Ministerial Committee of the producer group of the Organization of the Petroleum Exporting Countries (OPEC).
Rising geopolitical risk is raising expectations of possible supply disruption, but OPEC+ is unlikely to make any changes to oil production policy until a full ministerial meeting in June.
Ukraine’s attacks on Russian energy infrastructure are also raising the possibility that global crude oil supplies are tightening and helping support oil prices.
