Oil Prices Jump 2% on Improving Demand Outlook

The U.S. crude oil benchmark was trading up over 2% on Monday, with Brent gaining over 1.7% as the market digested data suggesting an improving demand outlook. 

At 2:28 p.m. ET on Monday, Brent crude was trading up 1.73% at $84.05, for a gain of $1.43 on the day. West Texas Intermediate (WTI) was trading up 2.17% at $80.15, for a gain of $1.70 on the day. 

In the prior week, oil enjoyed its first weekly gain in a month buoyed by reports that lent more optimism to oil demand in the second half of this year. OPEC+ has taken pains to assure markets that it could rethink plans to put more barrels on the market if conditions dictate. 

"The outlook for strong fuel demand into the coming quarter and Saudi reassurance about the October hike being subject to prevailing conditions and added focus on quota breakers to bring production down and into line all seems to be supporting," Reuters cited Ole Hansen of Saxo Bank as saying on Monday.

Reuters also reported that traders on Monday were rebuying oil they sold out last week after OPEC+ assurances.

Also driving oil prices upwards on Monday was economic data coming out of China and suggesting more optimism for oil demand growth there. 

While Chinese industrial output came in below expectations, investment in manufacturing so far this year was up 9.6%. 

Rystad Energy on Monday projected that global oil supply growth would slow in 2024 and potentially the following year, due to the extension of OPEC+ voluntary cuts and the cartel’s demand forecast. Rystad estimated supply growth at around 80,000 barrels per day for 2024, down from earlier expectations of 900,000 bpd, which had been made in early June Reuters reported on Monday. 

For this year, Rystad expected OPEC+ to remove 830,000 bpd from the market, while 2025 could see the expanded cartel take 1.04 bpd off the market. Rystad vice-president Patricio Valdiviesco told Reuters later in the day that it was “difficult to remain completely bearish when global supply growth is expected to slow down” this year, with reduced production still possible next year. 

By Josh Owens for Oilprice.com