Oil prices surged on Thursday to their highest levels in five months, as concerns over escalating geopolitical tensions in the Middle East raised the possibility of supply disruptions. The Organization of Petroleum Exporting Countries (OPEC) and its allies decided to maintain their existing production cuts during a meeting on Wednesday, contributing to a tight outlook for crude oil in the near future. By 21:13 ET (01:13 GMT), Brent oil futures expiring in June had increased by 0.3 percent to reach $89.64 per barrel, while West Texas Intermediate (WTI) crude futures rose by 0.3 percent to $84.90 per barrel.
Read more: Oil prices stabilize amid concerns over supply disruptions
The rising tensions in the Middle East added to the concerns. The situation in the region remained volatile, with various ceasefire proposals failing to de-escalate the conflict. Additionally, attacks on important Russian refineries by further disrupted the supply of oil and fuel in Moscow as several refineries reduced production or were temporarily shut down.
Supply disruptions drive positive outlook for oil prices
These geopolitical factors created a positive outlook for crude oil prices, particularly due to the potential for additional supply disruptions that could further tighten the market. Furthermore, the improving economic conditions in China, the largest importer of oil, also supported the increase in crude prices. China witnessed a series of positive readings in its Purchasing Managers’ Index for March, indicating growth in both manufacturing activity and the service sector. However, China still faced challenges in rebuilding its economy after the impacts of the COVID-19 pandemic.
Mixed U.S. inventories
The gains in crude oil prices were somewhat limited by mixed reports on U.S. inventories. Official data revealed an unexpected rise in overall crude stockpiles, partly attributed to the high levels of U.S. production. This increase in production offset the tight market conditions to some extent. However, there was positive news regarding U.S. fuel demand, as gasoline inventories experienced a larger-than-anticipated decline, indicating strong demand from the world’s largest consumer of fuel.
For more news on markets, click here.
