Brent crude oil continued its upward trajectory above $84 a barrel as demand in the United States and China, the two largest consumers of crude globally increased.
This surge in demand coupled with geopolitical tensions in the Middle East has bolstered oil markets, maintaining Brent crude’s resilience above $84 a barrel.
The latest data revealed a surge in demand, particularly in the U.S. where falling crude inventories coincided with higher refinery runs.
This trend indicates growing consumption patterns and a positive outlook for oil demand in the world’s largest economy.
In China, oil imports for April exceeded last year’s figures, driven by signs of improving trade activity, as exports and imports returned to growth after a previous contraction.
ANZ Research analysts highlighted the ongoing strength in demand from China, suggesting that this could keep commodity markets well supported in the near term.
The positive momentum in demand from these key economies has provided a significant boost to oil prices in recent trading sessions.
However, amidst these bullish indicators, geopolitical tensions in the Middle East have added further support to oil markets. Reports of a Ukrainian drone attack setting fire to an oil refinery in Russia’s Kaluga region have heightened concerns about supply disruptions and escalated tensions in the region.
Also, ongoing conflict in the Gaza Strip has fueled apprehensions of broader unrest, particularly given Iran’s support for Palestinian group Hamas.
Citi analysts emphasized the geopolitical risks facing the oil market, pointing to Israel’s actions in Rafah and growing tensions along its northern border. They cautioned that such risks could persist throughout the second quarter of 2024.
Despite the current bullish sentiment, analysts anticipate a moderation in oil prices as global demand growth appears to be moderating with Brent crude expected to average $86 a barrel in the second quarter and $74 in the third quarter.
The combination of robust demand from key economies like the U.S. and China, coupled with geopolitical tensions in the Middle East, continues to influence oil markets with Brent crude hovering above $84 a barrel.
As investors closely monitor developments in both demand dynamics and geopolitical events, the outlook for oil prices remains subject to ongoing market volatility and uncertainty.