Oil prices edged higher on April 1st as expectations of tighter supply remained in focus.
This bullish sentiment stems from two main factors: production cuts by OPEC+ and attacks on Russian refineries. Upbeat manufacturing data from China, the world’s largest oil importer, also added a positive note to the demand outlook.
Brent crude rose slightly to $87.25 a barrel, extending gains from last week. West Texas Intermediate crude also saw a small increase to $83.44 a barrel. Trading activity was low due to Easter holidays.
Supply constraints drive price increase
The Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) pledged to extend production cuts until June, potentially limiting crude supply during the upcoming summer season in the Northern Hemisphere.
Additionally, drone attacks on Russian refineries are expected to disrupt their fuel exports, further tightening the market.
Demand outlook bolstered by China’s recovery
Despite lingering concerns about China’s property sector, a recent survey revealed a six-month high in their manufacturing activity.
This positive data suggests a potential rise in oil demand from the world’s top importer.
Analysts point towards a potentially strong second quarter for oil demand, fueled by the combination of geopolitical tensions impacting supply and healthy demand trends in Europe.
However, some experts caution that persistent weakness in China’s overall economic growth could pose a downside risk.