By Adedapo Adesanya
Crude oil rose on Monday on the back of signs of improving demand in the US and China, the top two oil consumers.
Brent crude futures gained 57 cents or 0.7 per cent to settle at $83.36 a barrel and the US West Texas Intermediate (WTI) crude futures rose by 86 cents or 1.1 per cent to $79.12 a barrel.
Reports said prices also drew support from expectations of strong petrol demand in the US ahead of Memorial Day travel activity which forecasts show will be the highest since 2005, with road trips at a record since 2000.
This aligns with the possibility of US crude oil stockpiles likely declining last week. Declining stocks are typically a sign of improving demand.
Chinese data at the weekend showed consumer prices rising for a third straight month in April while producer prices extended declines, signalling improved domestic demand.
The country which is the world’s largest oil importer, also plans to raise 1 trillion Yuan ($138.26 billion) for economic stimulus. This could translate to increased appetite for energy.
On the supply front, investors are watching for potential oil supply disruptions in Western Canada due to wildfires the country’s government has warned could be catastrophic.
Oil prices have also found support from enduring expectations that the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) will extend supply cuts into the second half.
Iraq, the second largest producer in the 12-member OPEC group, said is committed to oil production cuts agreed by the group.
According to its oil minister, Mr Hayan Abdul Ghani on Sunday, Iraq is keen to cooperate with member countries on efforts to achieve more stability in global oil markets.
The minister’s comments followed an earlier suggestion made on Saturday that Iraq had made enough voluntary reductions and would not agree to any additional cuts proposed by the wider OPEC+ producer group at its meeting in early June.
Traders said they are more cautious about the Middle East as hopes have been dashed for a ceasefire in Gaza. Israel on Sunday pushed back into North Gaza, while the death toll in Israel’s military operation has passed 35,000 Palestinians.
Investors will watch the US Consumer Price Index (CPI) data due on Wednesday for clues to when the Federal Reserve will consider cutting interest rates. The country has a 2 per cent infation target.
Meanwhile, analysts expect the US central bank to keep its policy rate on hold for longer, supporting the Dollar and making oil more expensive for buyers holding other currencies.