Oil rises more than US$1 a barrel on tighter supply outlook

OIL prices jumped more than US$1 a barrel on Thursday, closing out the month higher on the prospect of Opec+ staying the course on production cuts, ongoing attacks on Russia’s energy infrastructure and a falling US rig count tightening crude supplies.

Brent crude futures for May settled at US$87.48 a barrel, its highest level since Oct 27, after gaining US$1.39, or 1.6 per cent. The more actively traded June contract settled at US$87 a barrel, rising US$1.58, with the May contract expiring on Thursday.

US West Texas Intermediate (WTI) crude futures for May delivery settled at US$83.17 a barrel, rising US$1.82, or 2.2 per cent.

On the week, Brent rose 2.4 per cent and WTI gained about 3.2 per cent. Both benchmarks finished higher for a third consecutive month.

In the prior session, oil prices had come under pressure from last week’s unexpected rise in US crude oil and petrol inventories, driven by an increase in crude imports and sluggish petrol demand, according to Energy Information Administration data.

However, the crude stock increase was smaller than the build projected by the American Petroleum Institute, and analysts noted the increase was lower than expected for the time of year.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

“We ... expect US inventories to rise less than normal in reflection of a global oil market in a slight deficit,” SEB analyst Bjarne Schieldrop said. “This will likely hand support to the Brent crude oil price going forward.”

US refinery utilisation rates, which rose 0.9 percentage point last week, also supported prices.

The oil and gas rig count, an early indicator of future output, also fell by three to 621 in the week to March 28, according to energy services firm Baker Hughes.

The US economy, meanwhile, grew faster than previously estimated in the fourth quarter. Gross domestic product increased at a 3.4 per cent annualised rate from the previously reported 3.2 per cent pace, the Commerce Department’s Bureau of Economic Analysis said.

“The strength in the stock market suggests strong forward earnings that are, in turn, hinting at a surprisingly strong US economy conducive toward better than expected energy product demand,” said Jim Ritterbusch of energy consultancy Ritterbusch and Associates.

Inflation data also affirmed the case for the US Federal Reserve to hold off on cutting its short-term interest rate target, a Fed governor said on Wednesday, but he did not rule out trimming rates later in the year.

“The market is converging on a June start to cuts for both the Fed and the European Central Bank,” JPMorgan analysts said in a note. Lower interest rates typically support oil demand.

Investors will watch for cues from a meeting next week of the Joint Monitoring Ministerial Committee of producer group the Organization of Petroleum Exporting Countries (Opec).

Increased geopolitical risk has raised expectations of possible supply disruption, but Opec+ is unlikely to make any oil output policy changes until a full ministerial gathering in June.

Attacks by Ukraine on Russian energy infrastructure have also boosted the sentiment around global crude supplies tightening and helped to support oil prices, said Again Capital LLC partner John Kilduff.

“It’s a prime target, and they appear to have not heeded the ask by the Biden administration to not attack Russian energy infrastructure,” Kilduff said. REUTERS