Oil prices soared to their highest levels in five months on Thursday, fueled by mounting concerns over escalating geopolitical tensions in the Middle East, which raised fears of potential supply disruptions. The decision by the Organization of Petroleum Exporting Countries (OPEC) and its allies to uphold existing production cuts during a meeting on Wednesday further compounded the tight outlook for crude oil in the near term.
As of 21:13 ET (01:13 GMT), Brent oil futures expiring in June saw a 0.3 percent increase, reaching $89.64 per barrel, while West Texas Intermediate (WTI) crude futures rose by 0.3 percent to $84.90 per barrel.
The heightened tensions in the Middle East exacerbated worries, with ceasefire proposals failing to quell the conflict’s volatility. Moreover, attacks on significant Russian refineries added to disruptions in oil and fuel supply in Moscow, as several refineries either scaled back production or temporarily ceased operations.
Supply Disruptions Fuel Optimism for Oil Prices
These geopolitical developments painted a positive picture for crude oil prices, with the potential for additional supply disruptions further tightening the market. Additionally, improving economic conditions in China, the world’s largest oil importer, lent support to the uptick in crude prices. Positive indicators in China’s Purchasing Managers’ Index for March signaled growth in both manufacturing activity and the service sector. However, China continued to grapple with challenges in rebuilding its economy following the COVID-19 pandemic’s impacts.
Mixed U.S. Inventory Reports
While crude oil prices surged, gains were somewhat tempered by mixed reports on U.S. inventories. Official data revealed an unexpected uptick in overall crude stockpiles, partially attributed to robust U.S. production levels, which offset tight market conditions to some degree. Nonetheless, there was positive news regarding U.S. fuel demand, as gasoline inventories recorded a larger-than-anticipated decline, underscoring robust demand from the world’s largest fuel consumer.