Oil futures: Crude extends gains, Brent tests $90/b

3 Apr 2024

Quantum Commodity Intelligence – Crude oil futures Wednesday climbing higher after markets consolidated the firm weekly gains that have lifted prices to five-month highs this week.

Front-month Jun24 ICE Brent futures were trading at $89.80/b (1730 GMT), compared to the day's high of $89.99/b and Tuesday's settle of $88.92/b.

At the same time, May24 NYMEX WTI was trading at $85.98/b versus Tuesday's settle of $85.15/b.

Oil benchmarks were already in the ascendency during the first quarter on growing optimism over the demand outlook and tight supply management from producers, but a further escalation in political tensions this week has lifted prices to fresh highs.

"This renewed tension comes at a time when oil fundamentals continue to firm thanks to the rollover of OPEC+ voluntary additional supply cuts," said Warren Patterson, head of ING's commodity research.

"The tightening in the oil market is evident in the price action we have seen in the timespreads for both Brent and WTI, with them moving into deeper backwardation," added Patterson.

The front-month Brent spread (Jun23/Jul24) has widened around $1/b this week, with spreads strengthening right down the curve this week, while May24/Jun24 WTI was around $0.90/b.

Middle East concerns were increasing as the war in Gaza rages on amid the growing humanitarian crisis, while Israel's strike on Iran's consulate in Damascus further heightened regional tensions.

The latest strike against one of Russia's largest refineries also sent jitters across the market, with Tatneft's 340,000 bpd Taneco complex located some 1,300 km (800 miles) from the conflict's frontline in eastern Ukraine.


Meanwhile, Wednesday's OPEC+ Joint Ministerial Monitoring Committee (JMMC) did not recommend changes to current policy, with any talks on increasing output likely to be saved for the ministerial meeting in Vienna.

OPEC+ has largely got compliance back under control this year, although analysts have said that $90/b Brent could make enforcement more difficult to police, with Iraq and Nigeria last month's primary quota busters.

Markets shrugged off weekly figures from the EIA showed commercial crude stocks in the US rising 3.2 million barrels in the week to 29, which was offset by a 4.3 million barrel draw in gasoline stockpiles.

Markets had found support early in the session after the American Petroleum Institute reported a drop of 2.3 million barrels in US crude stocks last week, in line with forecasts.

Gasoline stocks also dropped 1.4 million barrels, while distillates fell by more than 2.5 million barrels, according to the API industry body.

Elsewhere, China reported a second batch of solid data for the week as March PMI data revealed its service economy further expanded at the end of the first quarter of 2024, according to the latest Caixin/S&P Global survey.

Moreover, the pace of business activity growth accelerated in March with new business rising at the quickest rate in the year-to-date. Business confidence also improved, although employment levels declined amid evidence of reduced capacity pressures, noted the survey.

The Caixin/S&P Global services purchasing managers' index (PMI) edged up to 52.7 in March from 52.5 in February, holding above the 50-mark that separates expansion from contraction for a 15th consecutive month.