Crude Prices Jump on Positive US, China Demand Outlook

April 2, 2024
crude prices

By Adedapo Adesanya 

Crude prices edged up about 1 per cent on Monday on expectations oil demand will climb following the release of positive economic news from the US and China.

Brent futures were up 54 cents or 0.6 per cent to $87.54 per barrel, while the US West Texas Intermediate (WTI) futures rose 71 cents or 0.9 per cent to $83.88 per barrel.

In the US, manufacturing grew for the first time in over a year in March as production rebounded sharply and new orders increased. However, employment in factories remained subdued amid “sizable layoff activity” and prices for inputs pushed higher.

Also, data from the US Commerce Department last week showed the personal consumption expenditures (PCE) price index which the US Federal Reserve prefers to gauge inflation largely moderated in February, with the cost of services outside housing and energy slowing significantly.

While some analysts said the increase in prices for manufacturing inputs could give the U.S. central bank some pause on when to cut interest rates.

Most analysts said the moderation in the PCE price index should keep a June rate cut by the US central bank on the table.

Lower interest rates reduce the cost of buying goods and services, which could boost economic growth and increase oil demand.

In China, manufacturing activity expanded for the first time in six months in March, according to an official factory survey, supporting oil demand in the world’s largest crude importer.

According to analysts, Chinese oil demand is arguably the one missing factor outside of geopolitical headlines capable of taking oil prices to the next level.

In Japan, a survey showed optimism in the services sector climbed to a 33-year high in the first quarter on booming tourism and rising profits from price hikes.

In Europe, oil demand was firmer than expected, rising 100,000 barrels per day on the year in February, Goldman Sachs analysts said, versus a forecast for a 200,000 barrels per day contraction in 2024.

On the supply side, top oil exporter Saudi Arabia may raise the official selling price (OSP) for flagship Arab Light crude in May after Middle East benchmarks strengthened last month, according to industry sources.

This is after Russian Deputy Prime Minister Alexander Novak said the country’s oil companies will focus on reducing output rather than exports in the second quarter to evenly spread production cuts with other members of the Organization of the Petroleum Exporting Countries and allied producers, OPEC+.

Meanwhile, drone attacks from Ukraine have knocked out several Russian refineries, which is expected to reduce Russia’s fuel exports.

Almost 1 million barrels per day of Russian crude processing capacity is offline from the attacks, affecting its high-sulphur fuel oil exports that are processed at Chinese and Indian refineries.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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