BENGALURU: Oil prices experienced a notable uptick of more than 1% on Monday, propelled by optimism following OPEC‘s monthly market report, which alleviated concerns regarding diminishing demand. Additionally, fears of potential supply disruptions surfaced due to a U.S. investigation into suspected violations of Russian oil sanctions.
Brent crude futures saw an increase of $1.09, or 1.3%, settling at $82.52 per barrel. Simultaneously, U.S. West Texas Intermediate (WTI) crude futures rose by $1.09, or 1.4%, concluding at $78.26 per barrel.
In its monthly report, OPEC reassured that oil market fundamentals remained robust, attributing the recent drop in prices to speculators. OPEC marginally adjusted its 2023 forecast for global oil demand growth while maintaining a relatively high prediction for 2024.
Craig Erlam, senior market analyst at OANDA, noted, “The OPEC monthly oil market report appeared to push back against demand concerns, referencing overblown negative sentiment around Chinese demand while raising demand growth forecasts for this year and leaving them unchanged for next.”
Reports of the U.S. Treasury Department intensifying its scrutiny of Russian oil exports also contributed to the surge in oil prices. Notices were sent to ship management companies regarding 100 vessels suspected of violating Western sanctions on Russian oil.
The U.S. Energy Information Administration (EIA) had previously stated that the country’s crude oil production would rise less than expected this year, accompanied by a decline in demand. On Monday, the EIA projected a decrease in U.S. oil output for December, marking the second consecutive monthly decline.
Despite weak economic data from China, the world’s leading crude importer, and reduced supply requests from Saudi Arabia by Chinese refiners, oil prices appear to have stabilized after a 4% slide last week. Fawad Razaqzada, an analyst at City Index, suggests that the voluntary supply cuts by Saudi Arabia and Russia will likely persist into the next year, limiting potential downside risks.
Last week, leading oil exporters Saudi Arabia and Russia, part of the OPEC+ group, reaffirmed their commitment to additional voluntary oil output cuts until year-end amid ongoing concerns about demand and economic growth impacting crude markets.