Oil prices rose Monday, trading near fresh 10-month highs ahead of this week’s release of widely-watched monthly reports from the International Energy Agency and the Organization of the Petroleum Exporting Countries.
By 09:50 ET (13.50 GMT), the U.S. crude futures traded 0.3% higher at $87.73 a barrel, while the Brent contract climbed 0.5% to $91.14.Both contracts posted strong gains last week, climbing to their highest levels since November last year as a consequence of top producers Saudi Arabia and Russia announcing that they will extend voluntary supply cuts of a combined 1.3 million barrels per day until the end of the year.
Dollar weakness helps oil prices rise
The crude market has been helped Monday, after initial profit-taking, by weakness in the dollar, with the U.S. currency falling back from last week’s six-month high.
Recent signs of resilience in the U.S. economy pushed up concerns that the Federal Reserve will have enough headroom to keep interest rates higher for longer.
Key monthly reports due this week
Traders will be focusing this week on the monthly reports from both the International Energy Agency and the Organization of the Petroleum Exporting Countries this week for clues of how demand is likely to hold up this year..
Both groups expect tighter supplies to lift oil prices this year, and have also reiterated that crude demand is expected to remain relatively strong thanks to a recovery in China.
The IEA last month lowered its 2024 forecast for oil demand growth to 1 million barrels per day, while OPEC’s report kept its 2.25 million barrels a day demand growth forecast unchanged.
However, despite these reports, the latest data out of China has signaled a faltering recovery in the largest crude importer in the world from its COVID hit.
Germany to slip into recession this year – EC
Further evidence of increasing worries this year came from the latest economic forecasts from the European Commission Monday.
The EC cut its forecasts for the eurozone economy, saying the single currency area’s gross domestic product would expand 0.8% in 2023 and 1.3% in 2024, against forecasts of 1.1% and 1.6% respectively made in May.
Additionally, the group predicted that Germany, the region’s biggest economy, would slip into recession this year.
“Weakness in domestic demand, in particular consumption, shows that high and still increasing consumer prices for most goods and services are taking a heavier toll than expected in the spring forecast,” the Commission said.
The European Central Bank is scheduled to make its latest interest rate decision on Thursday. The central bank has raised rates at each of its past nine meetings and policymakers are now debating whether to raise the deposit rate again, to 4%, or pause.