Oil flies to 88 dollars on 5-month highs

The petrolium rises forcefully on international markets and reaches highs of the last 5 monthsas a reflection of a mix of factors: geopolitical tensions, increase in demand, rationing of supply. Elements that are destined to remain and which could bring the price of crude oil much higher in the coming months, especially if the improvement in the US and Chinese economies were to consolidate.

Crude oil prices

Oil prices pushed for the future on Brent for delivery in June 2024 at 88.66 dollars per barrel, at the highest levels of the last five months, up 1.18% compared to the day before, while for US light crudedue for delivery in May 2024, prices reached 84.88 USD/b, up 1.18%, still at the top since October 2023.

Geopolitical tensions and supply

The geopolitical tensions are playing a crucial role on the supply of oil, which promises to be scarce, due to the continuous attacks on Russian refineries, which are estimated to have reduced supply by at least 1 million barrels. Ukraine is now hitting a number of sensitive targets in Russia, including drone bombing of some energy facilities, including one of Lukoil's major refineries and a fuel depot. To these are added the effects of conflict in the Middle Eastwhich impacts OPEC+ production.

The cartel in its expanded formulation, which also includes Russia, has decided to beginning of March Of extend production cuts to 2 million of barrels, a little more than the 1.3 million already planned by Russia and Saudi Arabia, confirming the supply rationing path, in line with the strategy aimed at supporting prices around 80 dollars. A new OPEC+ meeting is scheduled for this week and we will know whether the rationing strategy will proceed according to plan.

Meanwhile, Russian Energy Minister Alexander Novak said that the oil companies will focus on production cuts to implement the cartel's output reduction, while Saudi Arabia plans to raise the selling price of Arab Light crude in month of May.+

Demand is expected to recover

On the demand front, net of the impact of the energy transitiona new increase in consumption is expected of oil in response to recovery of the economyia, especially from countries like the United States and China. In the USA, the ISM manufacturing grew for the first time in a year and a half, reaching 51.4 points in March from the previous 49.2. The data seems to signal a recovery of the US economy, which will also be revived by the rate cuts made by the Fed in the coming months.

Likewise, the Chinese manufacturing PMI has returned to the expansion zone for the first time in six months and confirms the recovery of Asia's largest economy, which is also the largest oil importer in the world.