Global Oil Prices Rise on Strong U.S. and China Demand Amid Middle East Tensions
Demand Signals Boost Oil Prices
Global benchmark Brent crude edged above $84 a barrel on Friday, buoyed by indications of growing demand in the United States and China, the world's two largest consumers of crude oil. The ongoing conflict in the Middle East also contributed to the upward pressure on prices.
Demand Strength from U.S. and China
Brent futures climbed 51 cents to reach $84.39 a barrel, while U.S. West Texas Intermediate crude rose 57 cents to $79.83.
Falling U.S. crude inventories, driven by increased refinery activity, coincided with data released on Thursday showing higher oil imports in China for April compared to the previous year. This uptick suggests improving trade activity in the world's second-largest economy.
Analysts at ANZ Research noted that ongoing signs of demand strength in China are likely to keep commodity markets well supported.
Escalating Tensions in the Middle East
In Europe, a Ukrainian drone attack reportedly ignited an oil refinery in Russia's Kaluga region, escalating tensions between the two nations.
Conflict in the Middle East persists, with Israeli forces carrying out airstrikes in the southern Gaza city of Rafah on Thursday. This followed unsuccessful negotiations to halt hostilities in the region.
Geopolitical Risks and Oil Prices
The ongoing conflict raises concerns about the potential for a wider regional crisis, particularly with Hamas, supported by Iran, a significant oil producer.
Analysts at Citi warned that Israel's actions in Rafah and escalating tensions on its Northern border suggest that geopolitical risks could persist throughout the second quarter of 2024.
Long-Term Outlook
Despite the current geopolitical tensions, Citi analysts anticipate a gradual easing of oil prices through 2024. They project Brent crude to average $86 a barrel in the second quarter and $74 in the third quarter, citing signs of moderation in global oil demand growth.
