Oil Prices Rise on Optimistic Demand Outlook and Geopolitical Tensions
In a recent report by Reuters, oil prices saw an increase on Tuesday as demand prospects in China and the US, the top oil consumers worldwide, appeared positive. Additionally, growing concerns over an escalating conflict in the Middle East raised worries about potential supply disruptions in the region.
Market Figures and Analyst Insights
Brent futures for June delivery climbed 58 cents to reach $88 a barrel, while US West Texas Intermediate crude futures for May rose 58 cents to $84.29 a barrel. These price hikes were supported by strong economic conditions in China and the US, as well as geopolitical tensions involving Iran in the Middle East.
According to IG market strategist Yeap Jun Rong, the accumulation of bullish factors, such as improved economic activity and escalating conflicts in the Middle East, contributed to the rise in oil prices.
Impact of Manufacturing Activity and Geopolitical Events
The expansion of manufacturing activity in China and the US, coupled with the recent Israeli strike on Iran’s embassy in Syria, has sparked concerns about potential disruptions in oil supply. China and the US are key players in the oil market, with China being the largest crude importer and the US being the biggest consumer.
ANZ analysts highlighted the potential threat to Iran’s oil supply due to its involvement in the conflict, raising concerns about the stability of oil prices in the near future.
OPEC+ Meeting and Production Cuts
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are set to hold an online meeting to review market conditions and members’ compliance with output cuts. Members are expected to maintain their current supply policy, which includes voluntary output cuts of 2.2 million barrels per day.
Recent data showed a decrease in OPEC’s output, indicating that the voluntary cuts are making an impact. Additionally, increased discipline in production cuts from OPEC+ members, along with potential further cuts from Russia, could push oil prices towards $90 a barrel in the short term.