Oil prices are expected to rise for the second consecutive month after briefly falling last year, with traders expecting an extension of OPEC+ production cuts.
The extension would contribute to the perception of tightness in the oil market, which has played a role in keeping oil prices elevated for most of the past two months.
Brent crude oil has risen about 2% since early February, and West Texas Intermediate was trading at more than $78 a barrel as of Wednesday, up from about $72 a barrel at the beginning of the month, according to Bloomberg.
In addition to OPEC+ production cuts, another factor supporting oil prices is the situation in the Red Sea, with virtually all shipping remaining closed, leading to the rerouting of hundreds of ships and demand for refueling fuel. This means an increase in
On the other hand, this week’s price is Slipped Already existing concerns about oil demand among the largest consumers deepened after both API and EIA reported weekly increases in crude oil inventories, even as gasoline and diesel fuel inventories declined.
ING Said In a note on inventory movements, it said gasoline inventories were below the five-year average after two consecutive weeks of ties. Distillate fuel inventories are already below that average and have been for about a year.
“The large stockpiles have heightened investors’ concerns about the U.S. economic downturn and declining oil demand,” Rakuten Securities analyst Satoru Yoshida told Reuters.
Meanwhile, looking to the future, Saad Rahim, chief economist at Trafigura Group, said, “We are hearing the term ‘upside risk’ more often than in the past few years.” Said Bloomberg.
While U.S. interest rates and Chinese consumption forecasts remain the most closely watched factors for traders and analysts tracking demand trends, when it comes to supply, the focus is on OPEC+ and U.S. shale.
Written by Irina Slav for Oilprice.com
