Oil Prices Continue to Advance as Bullish Sentiment Takes Hold

Crude oil prices held on to their gains from last week, moving higher still in mid-morning trade in Asia today amid continued concern about supply.

Last week, an IEA report fueled a 4% gain for benchmarks, with Brent crude topping $85 per barrel and West Texas Intermediate advancing above $81. The IEA said in its report that the oil market this year will swing into a deficit-a radical revision of its stance from last month when it said the market would be oversupplied.

The IEA revised its oil demand forecast higher, meanwhile, expecting growth to come in at over 1.3 million bpd this year, up from 1.2 million bpd in last month's report.

Another cause for supply concern was the string of Ukrainian drone attacks on Russian refineries which are affecting fuel output in the world's largest exporter.

"The strikes on Russian refineries added $2 to $3 a barrel of risk premium for crude last week, which remains in place as we start this week with more attacks over the weekend," Vandana Hari from Vanda Insights told Bloomberg.

Reuters has estimated that the attacks have caused the idling of 7% of Russia's refining capacity over the first quarter of the year.

Meanwhile, the prospect of peace between Israel and Hamas just became even more distant, as Israel's Prime Minister Benjamin Netanyahu said he would proceed with a planned attack on Rafah despite advice to the contrary from Israel's allies.

Going forward, this week traders will be watching the Fed's two-day meeting that starts tomorrow although there are no actual expectations of a rate cut, most expect the central bank to keep rates unchanged.

Meanwhile, CERAWeek begins in Houston, with several Big Oil chief executives slated to speak during its first day, including TotalEnergies' Patrick Pouyanne, Aramco's Amin Nasser, and Exxon's Darren Woods.

By Irina Slav for Oilprice.com

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