On Monday, oil prices experienced a significant surge, reaching their highest settlement levels in over a month. This increase, which added to the previous week’s gains, was driven by investor optimism regarding future demand.
U.S. West Texas Intermediate crude futures rose by $1.88, or 2.4%, settling at $80.33 a barrel, the highest since late April. Similarly, global benchmark Brent crude climbed $1.63, or 2%, reaching $84.25 a barrel, also the highest since April.
The previous week marked the first weekly gain for both benchmarks in four weeks. This was influenced by reports from the OPEC+ producer group, the International Energy Agency, and the U.S. Energy Information Administration, which collectively bolstered confidence in an improved oil demand outlook for the second half of the year, likely leading to a reduction in inventories.
OPEC+ reassurances about possibly pausing or reversing their plan to increase supplies from the fourth quarter of this year, depending on market conditions, also contributed to firming prices. This plan, announced after the group’s meeting on June 2, initially led to a sharp decline in prices.
Ole Hansen of Saxo Bank commented on the situation, noting that the positive outlook for fuel demand in the coming quarter, along with Saudi Arabia’s reassurance that the October hike would be contingent on prevailing conditions, and the increased focus on enforcing production quotas, all supported the price increase.
Investor activity also played a role. Data from the Commodity Futures Trading Commission revealed that investors repurchased some of the petroleum they had previously sold, alleviating concerns of a production battle that were mitigated by OPEC+ members’ PR efforts to assure market-dependent production changes.
Economic data from China added to the positive sentiment, with manufacturing investment showing robust growth of 9.6% in the first five months of the year, according to government data released on Monday. Although industrial output did not meet expectations, the overall economic indicators from China supported hopes for stronger oil demand from the world’s top importer.
Geopolitical factors further supported oil prices. Analysts from AEGIS Hedging noted a rising geopolitical risk premium. Concerns about a potential wider Middle East conflict persisted after the Israeli military warned that intensified cross-border fire from Lebanon’s Hezbollah movement could lead to serious escalation.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
