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Oil jumps, settles at highest in over a month on demand optimism

Published 2024/06/17, 02:59
Updated 2024/06/17, 22:03
© Reuters. FILE PHOTO: A view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel/File Photo
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By Shariq Khan

NEW YORK (Reuters) -Oil prices surged nearly $2 a barrel on Monday to their highest settlement levels in over a month, adding to last week's gains as investors grew more optimistic on the demand outlook.

U.S. West Texas Intermediate crude futures gained by $1.88, or 2.4%, to settle at $80.33 a barrel, the highest since the end of April. Global benchmark Brent crude gained $1.63, or 2%, to $84.25 a barrel, also the highest since April.

Last week, both benchmarks posted their first weekly gain in four weeks after reports from the OPEC+ producer group, the International Energy Agency and U.S. Energy Information Administration raised confidence that oil demand will improve in the second half of the year and help inventories draw down.

Reassurances from OPEC+ that a plan to raise supplies from the fourth quarter of this year could be paused or reversed based on market conditions also helped prices firm. That plan, unveiled after the group's meeting on June 2, had led to a sharp selloff in prices.

"The outlook for strong fuel demand into the coming quarter and Saudi reassurance about the October hike being subject to prevailing conditions and added focus on quota breakers to bring production down and into line all seems to be supporting," said Ole Hansen of Saxo Bank.

Investors last week repurchased some of the petroleum they had sold the week before, data from the Commodity Futures Trading Commission showed on Friday.

"Those funds who thought we were heading into a production battle, had their concerns quickly assuaged when OPEC+ members went on a PR campaign to assure the world their changes to production would be market dependent," said Alex Hodes, oil analyst at brokerage firm StoneX.

Economic data from China also supported hopes of stronger oil demand from the top importer, Hodes said.

Manufacturing investment in China in the first five months of this year showed robust growth of 9.6%, government data showed on Monday. Other data was mixed, however, with industrial output lagging expectations.

© Reuters. FILE PHOTO: A view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel/File Photo

Oil prices have also been supported by a rising geopolitical risk premium, AEGIS Hedging analysts noted on Monday.

Concerns of a wider Middle East war lingered after the Israeli military said on Sunday that intensified cross-border fire from Lebanon's Hezbollah movement into Israel could trigger serious escalation.

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