Oil prices surged on Tuesday, buoyed by indications of potential demand growth in China and the U.S., coupled with escalating concerns over a widening conflict in the Middle East that could disrupt the region’s oil supply.
Brent futures for June delivery climbed 41 cents to reach $87.83 a barrel by 0440 GMT, while U.S. West Texas Intermediate (WTI) crude futures for May rose by the same margin to $84.12 a barrel. This marked a continuation of the upward trend, with WTI reaching its highest close since October 27 in the previous session.
The bullish sentiment in oil markets was attributed to several factors. Firstly, there were reports of stronger-than-expected economic conditions in China and the U.S., the world’s largest oil-consuming nations. This offered a more optimistic outlook for oil demand, particularly as manufacturing activity in both countries showed signs of expansion.
According to IG market strategist Yeap Jun Rong, the bullish catalysts for oil prices continue to accumulate, with economic growth in China and the U.S. contributing to a positive demand outlook. Additionally, geopolitical tensions in the Middle East, particularly involving Iran, have added to the bullish sentiment.
In China, manufacturing activity in March expanded for the first time in six months, while in the U.S., it marked the first expansion in 1-1/2 years. Given that China is the world’s largest crude importer and second-largest consumer, and the U.S. is the biggest consumer, improved economic conditions in these countries are expected to drive oil demand higher this year.
Meanwhile, in the Middle East, tensions escalated further as an Israeli strike on Iran’s embassy in Syria resulted in the deaths of seven military advisors, including three senior commanders. This development has raised concerns about potential disruptions to oil supply from the region, adding to market uncertainty.
As oil prices continue to rise amidst a complex geopolitical landscape and evolving demand dynamics, market participants will closely monitor developments in key oil-consuming regions and geopolitical hotspots for further insights into price movements and supply-demand dynamics.
