Oil prices rose on Tuesday, supported by signs that demand may be improving in China and the United States, the world’s biggest oil-consuming countries, and growing concerns about a widening conflict in the Middle East that could affect supplies from the region.
Brent futures for June delivery were up 58 cents at $88 a barrel as of 06:41 GMT. West Texas Intermediate (WTI) May crude oil futures rose 58 cents to $84.29 a barrel, after reaching the highest close in front-month contracts since Oct. 27 in the previous session.
While stronger-than-expected economic conditions in China and the US provide a more optimistic demand outlook, geopolitical tensions in the Middle East continue to heat up with Iran’s intervention.
In March, manufacturing activity expanded in China for the first time in six months and the United States in 1.5 years. China is the world’s largest importer and second-largest consumer of crude oil, while the United States is the largest consumer. These data may translate into increased oil demand this year.
In the Middle East, the war in Gaza between Israel and Hamas, which is supported by Iran, appears to be escalating. The nearly six-month conflict has expanded to include Israel fighting directly with Iran, raising concerns about the impact on oil supplies.
To date, the market has not been concerned about supply disruptions as the war has been kept under control. However, Iran’s intervention holds oil supplies under threat.
OPEC+ and its allies will hold an online meeting with the Joint Ministerial Monitoring Committee on Wednesday to review the market and members’ production cut practices. Members are expected to maintain current supply policies, which call for voluntary production cuts of 2.2 million barrels per day (bpd) by the end of the second quarter.
Higher discipline is felt in the production cuts of OPEC + members. OPEC’s production fell by 50,000 barrels per day last month, suggesting the voluntary cuts are having some impact. The market should also consider larger production cuts from Russia over the next 3 months.
