Oil prices accelerated in Asian trading on Monday, extending gains of nearly 4% weekly on a view that supplies are tightening as new attacks on Russia’s energy infrastructure raise risks.
Brent crude oil futures for May delivery rose 47 cents, or 0.5%, to $85.81 a barrel by 0720 GMT. The April contract for West Texas Intermediate (WTI) crude oil rose 49 cents, or 0.6%, to $81.53. The more active May delivery contract for WTI was up 50 cents, or 0.6%, at $81.08 a barrel.
Attacks on Russian refineries added a $2 to $3 per barrel risk premium to crude last week. The risk continues as we head into this week with more attacks over the weekend. However, crude oil will wait for new signals for the next significant upward or downward movements.
One of Saturday’s attacks caused a brief fire at the Sloviansk refinery in Krasnodar, which processes 8.5 million metric tons of crude oil annually, or 170,000 barrels per day.
Refining complexes process varieties of crude oil and export them to various markets, including China and India. Analysis of the attacks found that Russia wasted about 7% of its refinery capacity in the first quarter.
In the Middle East, Benjamin Netanyahu insisted on Sunday that Israel will press ahead with plans to enter Gaza’s Rafah district, home to more than 1 million displaced people, despite pressure from its allies. Its allies are concerned that this step will make regional peace very difficult.
This week, investors will be watching the results of the Federal Reserve’s two-day meeting ending Wednesday, which will bring more clarity to the timing of rate cuts. The Fed will probably not change interest rates this month, but the possibility of a rate cut may be re-evaluated at the June meeting.
Low-interest rates will support oil prices by stimulating demand in the United States, the world’s largest oil consumer.
Brent and WTI rose weekly despite the decline on Friday. Oil has been in a certain range for most of last month. Still, a demand recovery report from the International Energy Agency (IEA) on Thursday showed prices rising to their highest level since November.
For the first time, the IEA predicted a slight supply deficit instead of a supply surplus this year. The agency had strengthened its demand outlook for the fourth time since November as Houthis’ attacks in the Red Sea change shipping course of crude oil and fuel carriers and reduced the oil available to users.
US fuel demand also supported prices as US refineries, which had experienced a seasonal pause, returned to full capacity and completed some projects.
As of Friday’s close, Brent and WTI futures were up 11% and 13%, respectively, in 2024.
