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HomeLatestOil Prices Rise on Economic Growth Expectations and Supply Concerns

Oil Prices Rise on Economic Growth Expectations and Supply Concerns

Crude oil prices experienced a modest increase, with U.S. futures reaching a five-month high, buoyed by optimistic forecasts for economic growth in the United States and China. The market also reacted to tightening supplies due to output cuts by the Organization of the Petroleum Exporting Countries and its allies, as well as recent attacks on Russian refineries.


Brent crude futures for June delivery settled at $87.42 a barrel, marking the beginning of June as the front month. This represented a rise of approximately 0.5% or 42 cents from the previous settlement price for the June contract on April 28. Notably, the May Brent contract had settled at a five-month high of $87.48 a barrel on April 28.


Meanwhile, U.S. West Texas Intermediate (WTI) crude futures climbed by 0.7% or 54 cents to settle at $83.71 per barrel, achieving their highest closing level since October 27.


The narrowing of the U.S. diesel crack spread, which measures refining profit margins, to its lowest level since May 2023 for the second consecutive day also contributed to the market dynamics.

Positive economic indicators from the U.S. and China further bolstered market sentiment. Manufacturing activity in the U.S. expanded in March for the first time in 1-1/2 years, although factory employment remained subdued. Analysts interpreted this data as reducing the likelihood of significant rate cuts by the U.S. Federal Reserve. In China, official factory surveys showed the first expansion in manufacturing activity in six months, indicating a potential increase in oil demand from the world’s largest crude importer.

Analysts emphasized the importance of Chinese oil demand in determining future oil price movements, suggesting that strong summer gasoline demand and a rebound in Chinese oil consumption could support prices reaching $100 a barrel.

Additionally, optimism in Japan’s services sector reached a 33-year high in the first quarter, driven by booming tourism and rising profits. In Europe, oil demand exceeded expectations, rising by 100,000 barrels per day (bpd) in February, contrary to forecasts of a 200,000-bpd contraction for 2024.

On the supply side, concerns emerged over potential disruptions to Russian oil exports following drone attacks on several Russian refineries from Ukraine. This development has resulted in nearly 1 million barrels per day of Russian crude processing capacity being offline, impacting fuel exports from the country.

Looking ahead, market participants will closely monitor developments related to Saudi Arabia’s official selling prices for crude oil in May, as well as Russia’s commitment to reducing output in the second quarter to align with OPEC+ production cuts.