Oil Prices Rise on Lower Inflation and Druzhba Pipeline Restart
Oil prices edged on Monday as the dollar weakened, following upbeat US inflation figures that may give the green light to further policy easing. Brent crude futures traded 0.5% higher to $73.31 a barrel, while US West Texas Intermediate (WTI) crude futures rose 0.6% to $69.86 by 0729 GMT.
Market analysts noted that risk commodities such as crude oil and equity futures began the week stronger. IG Markets analyst Tony Sycamore said the inflation number brought relief for concerns by the Federal Reserve and its more hawkish stance on its recent rate cut. Sycamore also noted that the positive market mood could be attributed to passing a bill to reopen the U.S. Senate after a very short government shutdown.
Supply Concerns Ease as Druzhba Pipeline Restarts
The market gained relief about European oil supplies with the commencement of the Druzhba pipeline. The pipeline transports Russian and Kazakh oil to Hungary, Slovakia, The Czech Republic, and Germany. It ceased operations last Thursday due to a technical complication. Nevertheless, according to Belarus’s BelTa state news agency, the shipment resumed on Saturday.
Foreign Minister of Hungary Peter Szijjarto confirmed that crude supplies have resumed in Hungary. Before the disruption, the pipeline transported about 300,000 barrels of crude oil per day.
In the US, Baker Hughes indicated an increase in the operating oil rigs, up by one to 483 in the last week. This is the highest number since September, indicating a consistent rate of domestic output.
Market Outlook: Growing Supply Surplus
Despite the price improvement, the outlook for oil markets remains uncertain. Observers at Macquarie predicted an oversupply for the upcoming year, which might put more pressure on prices. Further, Brent crude prices: The firm anticipates that the average price per barrel in 2024 will be $70.50, down from an average of $79.64 per barrel in 2023.
China’s largest refiner, Sinopec, suggested that China’s oil demand will probably peak in 2027, adding to the market’s worries about the longer-term demand side. On the other hand, the speculative activities in the US oil market indicated that the money managers raised their net long positions in crude futures and options from December 17, according to the CFTC report.