Crude Settles Higher as Demand Optimism Offsets Chinese Data

Oil prices marked an increase on Monday, building on gains from the previous week as optimism regarding demand outweighed concerns over declining refinery activity in China, the largest oil importer globally.

As of 14:30 ET (13:30 GMT), oil futures were up 2.4% at $80.33 per barrel, while the Brent contract rose by 2% to $84.25 per barrel.

### Gains Follow a Winning Week

Last week saw the crude benchmarks notch their first weekly gains in four weeks, driven by expectations that the upcoming summer vacation season in the Northern Hemisphere would elevate fuel demand. Monthly reports released recently indicated that oil inventories are expected to decline in the latter half of the year, despite differing views on the pace of demand growth.

The U.S. Energy Information Administration (EIA) revised its global oil demand forecast for next year to an average of 104.5 million barrels per day, up from an earlier estimate of 104.3 million bpd. Meanwhile, OPEC reiterated its positive outlook for strong global oil demand in 2024, even as the International Energy Agency (IEA) cut its forecast for 2024 global crude demand by 100,000 barrels per day to 960,000 bpd.

### Disappointing Data from China

However, signs of an uneven economic recovery emerged from China, the world’s second-largest economy. Manufacturing activity improved in May due to a holiday boost, but year-on-year growth slowed to 5.6%, down from 6.7% in April and below the anticipated 6% increase.

Furthermore, crude oil refinery output in China experienced a year-on-year decrease of 1.8% in May, attributed largely to both planned and unplanned maintenance outages, as well as reduced processing rates caused by rising crude oil prices and diminishing margins.

### Support from Middle East Tensions

Continued tensions in the Middle East also provided some support to oil prices. The Israeli military warned that heightened cross-border hostilities with Hezbollah in Lebanon could lead to serious escalation.

Additionally, weekly data indicated that the number of U.S. oil rigs declined by four for the third consecutive week, bringing the total rig count to 488 for the week ending June 14, 2024. Analysts noted that this marks the lowest level of active oil rigs since January 2022, reflecting a decrease of 64 rigs compared to the previous year, which suggests a tighter supply outlook moving forward.

This upcoming week lacks significant events on the energy calendar, with only the routine weekly U.S. inventory reports scheduled. Traders will also be attentive to remarks from several Federal Reserve officials, as they assess the potential trajectory of U.S. interest rates and its impact on economic activity in the largest global economy.