Oil prices showed positive movement on Monday, with both major benchmarks rising as lower-than-expected US inflation data strengthened market optimism about potential monetary policy easing. However, projections of oversupply in the coming year continued to moderate price gains.
Brent crude futures increased by 37 pence, reaching $73.31 per barrel, whilst US West Texas Intermediate crude futures advanced by 40 pence to $69.86 per barrel by 0729 GMT. The uptick follows a challenging previous week when both benchmarks declined by more than 2% amid concerns about global economic growth and oil demand.
Market analyst Tony Sycamore from IG markets noted that risk assets, including crude oil and US equity futures, began the week on firmer ground. The combination of cooler inflation data and the US Senate’s passage of legislation to end a brief government shutdown contributed to the improved market sentiment.
The market’s positive response comes despite recent caution from the US Federal Reserve regarding further monetary policy easing. Adding to market considerations, Asia’s largest refiner, Sinopec, released research indicating that China’s oil consumption is expected to peak in 2027.
In European markets, concerns about supply disruption eased following the restart of the Druzhba pipeline, which had halted operations on Thursday due to technical issues at a Russian pumping station. The pipeline, which typically transports 300,000 barrels per day of Russian and Kazakh oil to Hungary, Slovakia, the Czech Republic, and Germany, resumed shipments on Saturday, according to Belarus’ BelTa state news agency.
The situation drew attention from US President Donald Trump, who issued a warning to the European Union, urging increased imports of US oil and gas under the threat of potential tariffs on EU exports. The European Commission responded by expressing willingness to discuss strengthening energy sector relationships.
In a separate development, Trump also sparked controversy by threatening to reassert US control over the Panama Canal, citing concerns about excessive usage rates. This statement prompted a sharp response from Panamanian President Jose Raul Mulino.
The US oil sector showed modest growth, with Baker Hughes reporting an increase of one operating oil rig, bringing the total to 483, the highest level since September. Meanwhile, Commodity Futures Trading Commission data revealed that money managers had increased their net-long positions in US crude futures and options.
Looking ahead, Macquarie analysts have forecast a growing supply surplus for 2024, projecting average Brent prices to decline to $70.50 per barrel, down from this year’s average of $79.64. This outlook suggests continued pressure on oil prices despite current market optimism.