Oil futures: Brent posts 5-month highs on upbeat China data, Iraq cuts

Quantum Commodity Intelligence – Crude oil futures started the new month on a positive note as benchmarks registered fresh five-month trading highs, bolstered by upbeat economic data and OPEC+ tightening up on production.

Front-month Jun24 ICE Brent futures were trading at $87.62/b (1740 GMT), compared to Thursday’s pre-holiday settle of $87/b and having peaked at $87.98/b in Monday's trade.

At the same time May24 NYMEX WTI was trading at $83.97/b, versus the day's high of $84.94/b and Thursday’s settle of $83.17/b. 

Oil futures were given a lift by solid economic data from China as the manufacturing sector expanded at the fastest pace in 13 months during March, according to the latest Caixin survey, with growth in both domestic and overseas demand accelerating.

The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), which gives an independent snapshot of the sector, rose to 51.1 in March, up from 50.9 the previous month.

This came after the pre-weekend data release from the US, which revealed the US economy grew at a solid 3.4% annual pace from October through December.

However, inflation remains a concern as the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures price index, increased 2.5% for the 12 months ended February, up from January’s 2.4% rise in prices.

But the overall positive data helped cement the solid Q1 gains, which had seen Brent increase 13% since the start of the year.

Prices also found support Monday as a Reuters survey found that Iraq cut March production by 50,000 bpd, although still coming in around 130,000 bpd over its 4 million bpd OPEC+ quota. 

Physical

On the downside, traders were eyeing the weaker North Sea market, while the slump in distillate margins has also weighed on sentiment.  

North Sea physical grades are again trading at discounts to the underlying Dated Brent swap amid ample supplies of WTI crude from the US.

In the products market, diesel cracks have tumbled to multi-month lows in Asia and Europe, with oversupply emerging in both east and west of Suez markets.

LSGO cracks dropped below $24/b versus ICE Brent crude late last week, while Singapore 10ppm gasoil cracks have fallen below $20/b against both Brent and Dubai.

This comes despite the loss of around 900,000 million bpd of Russian refinery capacity following the drone strikes, with ample supplies from Asia and the US seen covering the diesel losses.