Markets are set to close the week with a moderate rise as they await OPEC+’s decision on supply agreements for the second quarter due to different demand indicators for major consumers such as the US and China.
Brent futures for May rose 31 cents, or 0.38%, to $82.22 a barrel by 06:45 GMT, while WTI for April rose 24 cents, or 0.31%, to $78.50.
WTI is on track to rise at least 2.5% this week, while Brent remains near last week’s settlement price. Brent has been comfortably above $80 for three weeks and has traded sideways this week.
Expectations that OPEC+ production cuts will continue in the 2nd quarter as demand is expected to remain weak also suppress the sentiment. However, the time intervals of Brent futures contracts have widened.
Analysts stated that the upward price trend increased as the markets priced the tightening in the coming months.
The Organization of Petroleum Exporting Countries pumped 26.42 million barrels per day (bpd) this month, surveys showed; This was up 90,000 barrels from January. Libyan output rose month-on-month by 150,000 bpd.
Sources said the decision on extending the cuts is expected in the first week of March and individual countries are expected to announce their decisions.
The increasing likelihood that OPEC+ will continue supply cuts beyond the first quarter, potentially into the end of 2024, will likely keep oil prices above US$80/bbl.
Strong expectations that Saudi Arabia will keep futures prices of the crude oil it sells to Asian customers little changed from March also supported the market.
The US personal consumption expenditures (PCE) index, which supports the Fed’s preferred inflation indicator, showed that January inflation aligned with economists’ expectations, strengthening the market’s predictions for an interest rate cut in June. This could reduce consumer costs and encourage fuel purchasing activity.
However, mixed February purchasing managers index (PMI) data from China, the world’s largest oil consumer, limited price increases.
China’s manufacturing activity contracted for a fifth consecutive month in February, according to an official factory survey on Friday. This situation is an indication that factory owners are having difficulty receiving orders. Beijing has increased pressure on policymakers to take more stimulus measures.
It is sure that there will be disruptions on the demand side in the second quarter. It is estimated that Brent will be lower on average in the 2nd quarter compared to the 1st quarter, and will then recover in the second half of the year with the effect of the possible interest rate cut scenario, which will increase the fund flow towards risky assets.
