Crude oil prices are on track for a weekly gain, buoyed by encouraging data from both the United States and China, the world’s top consumers of crude oil. This uptick comes amidst ongoing uncertainties surrounding the Gaza conflict.
The increase in oil prices is largely attributed to a concurrent decline in US crude inventories, driven by heightened refinery activity. This trend aligns with recent data indicating that China’s oil imports in April surpassed last year’s figures, signaling an uptick in trade activity.
Despite efforts to negotiate a ceasefire between Israel and Hamas, the conflict persists, fueling concerns about potential disruptions to oil supplies in the Middle East.
As of 0635 GMT, Brent futures have risen by 0.7 percent to $84.47 per barrel, marking a weekly gain of 1.8 percent. Similarly, US West Texas Intermediate crude has climbed by 0.8 percent to $79.91 per barrel, with a weekly increase of 2.3 percent.
The positive momentum in oil prices is further supported by China’s rebounding exports and imports in April, indicating strengthening demand in the region.
Commenting on the market dynamics, ANZ Research noted, “Ongoing signs of strength in demand in China should see the commodity market remain well supported.”
However, geopolitical tensions persist, with Israeli forces continuing to engage in conflict with Hamas. This raises concerns about potential escalation and involvement of other Middle Eastern countries, particularly Iran, a key oil producer and supporter of Hamas.
Citi analysts highlighted, “Israel’s actions in Rafah and escalating tensions on its Northern border serve as a reminder that geopolitical risks could persist throughout Q2 2024.”
Despite these uncertainties, analysts anticipate a gradual easing of oil prices throughout 2024. Brent is projected to average $86 a barrel in the second quarter and $74 in the third quarter, reflecting looser supply and demand fundamentals amidst indications of moderating global oil demand growth.
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