Oil prices climbed on Monday due to a tightening supply and expectations for economic stimulus in China, which helped Brent oil maintain a price comfortably above $80 a barrel.
This upward trend persisted despite market predictions of upcoming interest rate increases from central banks in the U.S. and Europe.
By 11 GMT, Brent crude futures had increased by 44 cents, or 0.6%, reaching $81.51 a barrel. Simultaneously, U.S. West Texas Intermediate (WTI) crude saw a similar increase of 44 cents, or 0.5%, landing at $77.51 a barrel.
Both benchmarks enjoyed a positive week, with Brent and WTI climbing 1.5% and 2.2% respectively, marking their fourth consecutive week of gains.
This trend is attributed to an anticipated tightening of supply in the wake of recent cuts by OPEC+. Furthermore, the conflict in Ukraine has intensified following Russia’s withdrawal from a U.N.-negotiated safe sea corridor agreement for grain exports.
The bank said it sees some upside for oil over the summer and forecast an average price in the third quarter of $83 a barrel.
“While another Fed rate hike this week may drive some short-term price volatility, we expect tightening market conditions on OPEC’s supply cuts and increasing market speculation of further stimulus in China to continue to push prices higher through 3Q23,” analysts from National Australian Bank said in a note.
Investors are predicting quarter-point increases from the Federal Reserve and the European Central Bank this week, so attention will be on comments from Fed Chair Jerome Powell and ECB President Christine Lagarde regarding future rate hikes.
The strengthening dollar and the consequent higher prices of dollar-denominated commodities for holders of other currencies can be attributed to the increasing interest rates.
In an attempt to stimulate private investment in certain infrastructure sectors, China’s state planner announced several measures on Monday and promised to enhance financial backing for private projects.
Market stakeholders anticipate targeted stimulus measures from Beijing to bolster its sluggish economy, which is likely to result in increased oil demand from the world’s second-largest consumer.