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.