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Oil steady as supply concerns ease

oil jumps

The May delivery of Brent futures settled at $82.21 per barrel, showing a slight gain of 13 cents

Oil prices experienced minimal movement on Monday, as concerns regarding potential disruptions in supply due to conflicts in the Middle East eased.

Additionally, weak demand indicated by Chinese data contributed to the stability in prices. However, the increase in U.S. refining activity limited any significant decrease in prices.

The May delivery of Brent futures settled at $82.21 per barrel, showing a slight gain of 13 cents. On the other hand, the U.S. crude April contract ended at $77.93 per barrel, slipping by 8 cents.

I guess it’s: the barrel half empty or the barrel half full, depending on how you look at it, said Phil Flynn, pointing to conflicting forces keeping oil prices from moving far in either direction.

Last week, both benchmarks closed lower, with Brent experiencing a 1.8% decrease and WTI ending 2.5% lower. Despite this, Brent has managed to remain above $80 per barrel for over a month.

Chinese crude oil imports have risen in the first two months of the year compared to the same period in 2023, but they were weaker than the earlier months, indicating a trend of reduced purchases. However, oil investors seemed to overlook geopolitical conflicts that were initially expected to tighten global crude supplies.

It seems that the Middle East conflict is not high on the list of driving forces of investors, as it has not led to meaningful supply disruptions, according to Tamas Varga of oil broker PVM.

Meanwhile, U.S. data has been sending mixed signals about the health of the world’s biggest economy. Although job growth accelerated in February, an increase in the unemployment rate and a moderation in wage gains have kept the possibility of a June interest rate cut on the table. U.S. inflation data is expected to be released on Tuesday.

The increase in U.S. refining activity, which has the potential to tighten global crude supplies, has played a role in limiting any significant decline in oil prices. U.S. crude stockpiles have been increasing for six consecutive weeks due to low refining rates.

Analysts predict a 1.4 percentage point increase in refining rates for the previous week, following a significant jump of 3.4 percentage points to a six-week high of 84.9% of total capacity the week before, according to weekly government data.

The increasing refining utilization rate has the possibility of popping a storage draw for the first time this year, Mizuho bank’s Bob Yawger said.

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