Demand Optimism Triggers 2% Gain in Brent, WTI

By Adedapo Adesanya

Oil prices surged by 2 per cent on Monday to their highest settlement levels in over a month, adding to last week’s gains as investors grew more optimistic about the demand outlook.

Global benchmark Brent crude gained $1.63 or 2 per cent to $84.25 quote at a barrel while the US West Texas Intermediate (WTI) crude futures appreciated by $1.88 or 2.4 per cent to settle at $80.33 a barrel as both sold at the highest since the end of April.

Following reports from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) producer group, the US Energy Information Administration (EIA) and the International Energy Agency (IEA) raising confidence that oil demand will improve in the second half of the year and help inventories drawdown, both benchmarks posted their first weekly gain in four weeks last week.

Prices were also supported by OPEC+’s promises that a plan to increase supply starting in the fourth quarter of this year can be postponed or reversed depending on market circumstances.

Following the group meeting on June 2, the plan was revealed, which caused a significant decline in prices.

Economic data from China also supported hopes of stronger oil demand from the top importer. The world’s largest oil importer saw its manufacturing investment in the first five months of this year with robust growth of 9.6 per cent, government data showed on Monday.

Other data was mixed, however, with industrial output lagging expectations.

Analysts also noted on Monday that oil prices have also been supported by a rising geopolitical risk premium.

Concerns of a wider Middle East war lingered after the Israeli military said on Sunday that intensified cross-border fire from Lebanon’s Hezbollah movement into Israel could trigger serious escalation.

Reuters also reported that traders on Monday were rebuying oil they sold out last week after OPEC+ assurances.

Meanwhile, Rystad Energy on Monday projected that global oil supply growth would slow in 2024 and potentially the following year, due to the extension of OPEC+ voluntary cuts and the cartel’s demand forecast.

Rystad estimated supply growth at around 80,000 barrels per day for 2024, down from earlier expectations of 900,000 barrels per day, which had been made in early June.