By Florence Tan
SINGAPORE (Reuters) – Oil prices fell slightly on Monday, holding on to most of their recent gains amid expectations of tighter supply from OPEC+ cuts, attacks on Russian refineries and positive Chinese manufacturing data.
fell 17 cents, or 0.2%, to $86.83 a barrel by 0017 GMT, after rising 2.4% last week. U.S. West Texas Intermediate crude settled at $83.06 a barrel, down 11 cents, or 0.1%, after a 3.2% gain last week.
Trading volumes are expected to be muted on Monday as several countries are closed for the Easter holidays.
Both benchmarks closed higher for the third consecutive month, with Brent holding above $85 a barrel since mid-March, while the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, are committed to extending production cuts until the end of June. which could tighten crude oil supplies over the summer in the Northern Hemisphere.
Russian Deputy Prime Minister Alexander Novak said on Friday that his oil companies will focus on reducing production rather than exports in the second quarter, in order to evenly distribute production cuts with other OPEC+ member countries.
Drone attacks have knocked out several Russian refineries, which is expected to reduce Russia’s fuel exports.
“Geopolitical risks to crude oil and heavy commodity supplies add to strong demand fundamentals in Q2 2024,” analysts at Energy Aspects said in a note.
Nearly 1 million barrels per day of Russian crude processing capacity is offline due to the attacks, impacting exports of high-sulfur fuel oil that is processed in Chinese and Indian refineries, the consultancy added.
In Europe, oil demand was stronger than expected, rising 100,000 bpd year-on-year in February, analysts at Goldman Sachs said, compared with a forecast of a 200,000 bpd contraction in 2024.
Solid demand from Europe, weak US supply growth coupled with a possible extension of OPEC+ cuts through 2024 outweigh the downside risk from persistent weakness in Chinese demand, it said in a note.
“We view the risks to our forecast that Brent will average $83 a barrel in the fourth quarter of 2024 as moderately tilted to the upside,” the analysts said.
However, China’s manufacturing activity expanded for the first time in six months in March, an official survey of factories showed on Sunday, supporting oil demand at the world’s largest crude importer even as the crisis in the real estate sector it continues to slow down the economy.
Investors are also analyzing U.S. economic data for signs of when the Federal Reserve will cut interest rates this year, which will support the global economy and oil demand.