Oil prices went up nearly 1% in the last session, with Brent crude, the global benchmark, seeing its first weekly gain in three weeks. This rise came after strong economic data from China and the U.S., the world’s top two oil consumers, boosted hopes for increased demand.
Brent crude rose by 71 cents, or 0.9%, to $83.98 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude went up by 83 cents, or 1.1%, to $80.06 a barrel. Over the week, Brent increased by about 1%, and WTI by 2%.
Impact of Chinese Industrial Growth and U.S. Economic Indicators
In April, China’s industrial output grew by 6.7% compared to the previous year, indicating a recovery in its manufacturing sector. This suggests a possible increase in future demand for oil. Additionally, China took significant measures to stabilize its troubled property sector.
Bob Yawger, director of energy futures at Mizuho, mentioned that the positive Chinese data supported oil prices. However, a decline in China’s annual refined output might have lessened this support.
Global trading hubs saw declines in oil and refined product inventories, reversing the previous trend of rising stockpiles that had negatively impacted oil prices. This created optimism about future demand.
In the U.S., the oil rig count increased by one to 497 this week, marking the first rise in four weeks, according to energy services firm Baker Hughes.
Recent U.S. economic data also contributed to the positive outlook for global oil demand. U.S. consumer prices rose less than expected in April, raising hopes for lower interest rates. Tim Snyder, an economist at Matador Economics, noted that the consumer price data was better than expected, giving the U.S. economy a slight boost.
Upcoming OPEC Meeting and Supply Concerns
Lower U.S. interest rates could weaken the dollar, making oil, which is priced in dollars, cheaper for buyers using other currencies.
Meanwhile, a fire broke out at Russia’s Tuapse oil refinery following a series of Ukrainian drone attacks, though the extent of the damage is still unclear.
Looking ahead, investors are anticipating the upcoming OPEC meeting on June 1 for further direction. With Brent crude prices below $90, analysts like Ole Hansen from Saxo Bank expect OPEC to maintain current production cuts.
Additionally, money managers increased their net long positions in U.S. crude futures and options in the week leading up to May 14, according to the U.S. Commodity Futures Trading Commission (CFTC).
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