Oil prices climbed on Monday, driven by forecasts of a supply deficit stemming from peak summer fuel consumption and ongoing OPEC+ production cuts.

Brent crude oil, against which Nigerian oil is priced, rose 53 cents, or 0.6% to $85.53 a barrel, while the U.S. West Texas Intermediate (WTI) crude oil increased by 51 cents, or 0.6%, to $82.05 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, extended most of their deep oil output cuts well into 2025.

This led analysts to forecast supply deficits in the third quarter as transportation and air-conditioning demand during summer draw down fuel stockpiles.

The Energy Information Administration (EIA) reported on Friday that oil production and demand for major products rose to a four-month high in April, further supporting prices.

“We continue to hold a supportive view towards Brent, although there are concerns around demand, such as U.S. gasoline demand and Chinese apparent demand,” said Warren Patterson, an analyst at ING, in a note.

Despite these positive signals, global economic headwinds and rising non-OPEC+ output have capped gains.

Factory activity among smaller Chinese manufacturers grew at the fastest pace since 2021 due to overseas orders, a private index showed, even as a broader survey indicated weak domestic demand and trade frictions had led to another industrial sector contraction.

China remains the world’s second-largest consumer and top importer of crude.

Hopes of an interest rate cut by the U.S. Federal Reserve and rising geopolitical concerns in Europe and between Israel and Lebanon’s Hezbollah have also kept a floor under prices, according to Tony Sycamore, an analyst at IG.

WTI’s recent rally may extend towards $85 a barrel if prices remain above the 200-day moving average at $79.52, Sycamore noted.

Traders are also watching for the impact of hurricanes on oil and gas production and consumption in the Americas.

The Atlantic hurricane season began with Hurricane Beryl on Sunday. Beryl, the earliest Category 4 hurricane on record, headed toward the Caribbean’s Windward Islands, where it is expected to bring life-threatening winds and flash flooding on Monday, according to the U.S. National Hurricane Center.

During the Asian trading session on Friday, oil prices sustained their upward increase to set the stage for a third consecutive weekly gain.

This rise is fueled by growing optimism that the U.S. Federal Reserve will soon begin cutting interest rates and improving refining margins.

Brent crude oil, against which Nigerian oil is priced, saw an increase of 48 cents, or 0.56% to settle at $86.87 a barrel.

The U.S. West Texas Intermediate (WTI) crude oil gained 52 cents, or 0.64% to settle at $82.26 a barrel.

This positive trend persists despite unexpected increases in U.S. crude inventories, which had been anticipated to decline during the peak summer demand period.

“Crude oil edged higher despite weak near-term fundamentals,” commented ANZ analysts. They attributed the price rise to a broader market risk-on tone, triggered by data signaling further weaknesses in the U.S. labor market.

The market’s optimism has been further buoyed by rising expectations of an imminent Federal Reserve easing cycle.

Traders are now pricing in a 64% chance of a rate cut by September, up from 50% just a month ago, according to the CME FedWatch tool.

Lower interest rates could potentially stimulate oil demand by reducing borrowing costs for consumers.

The recovery in physical refining margins has also supported the oil markets. The Singapore complex refining margins have averaged $1 higher in June compared to May, standing at around $3.60 a barrel.

Ivan Mathews, head of Asia refining at FGE, said, “Heading to Q3, we expect refining margins to remain around current levels. We anticipate gasoline prices to continue rising through August, offset by easing diesel cracks amid lengthening East of Suez balances.”

Despite the overall positive sentiment, market analysts are cautious about several downside risks. Fluctuations in the U.S. dollar, which is at a two-month high, and political uncertainty in France could impact oil demand.

Kelvin Wong, a senior market analyst at OANDA, highlighted, “The downside risk factor at play is related to USD volatility, bearing in mind the U.S. core PCE inflation data due later today.”

Wong also noted that oil prices might face short-term profit-taking at the start of next week if the first-round results of the French legislative election on June 30 show lower public support for a far-right group advocating a halt to green energy development.

In a bid to unlock Nigeria’s vast but underutilized heavy crude oil reserves, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) convened a pivotal industry workshop in Abuja.

The event, attended by key stakeholders from the oil and gas sector, focused on strategizing ways to accelerate the development of the country’s heavy crude assets through collaborative efforts.

Mr. Gbenga Komolafe, CEO of NUPRC, underscored the urgency and potential of Nigeria’s heavy crude reserves, which stand at approximately 1.6 billion barrels, with only a mere 5% currently developed.

Addressing participants, Komolafe said there is a need for a paradigm shift from traditional approaches to a more integrated and collaborative model involving all industry players.

“Heavy crude oil presents a significant opportunity for Nigeria’s energy sector,” Komolafe stated during his keynote speech themed “Entrenching Accelerated Development of Petroleum Prospecting Licenses (PPL) Assets and Heavy Crude Reserves Through Strategic Partnerships with Technology Drivers and Industry Service Providers.”

He highlighted the distribution of these reserves across different terrains and ownership structures, with a substantial portion located in onshore acreages.

Despite the challenges posed by the high viscosity and sulfur content of heavy crude, Komolafe expressed confidence that with the right technological innovations and collaborative frameworks, Nigeria can effectively harness these resources.

The workshop, a platform for intensive dialogue and knowledge-sharing, also addressed the regulatory frameworks introduced under the Petroleum Industry Act (PIA) of 2021.

This legislation aims to modernize the upstream oil and gas sector, streamline licensing processes, and attract new investments.

Participants discussed practical steps to enhance operational efficiency, ensure regulatory compliance, and foster sustainable development practices within the sector.

The event concluded with a commitment to implement agreed-upon best practices that prioritize efficiency, transparency, and environmental sustainability.