Oil Now Overbought As Focus Settles On Better Than Expected Performance From China

Meanwhile, record volumes of Russian crude are heading to China: File Image/Pixabay

Oil prices on Monday reached overbought territory, rising to a four month high due partly to signs of economic growth and strong demand in China.

Prices were also said to have been supported by crude exports from Saudi Arabia declining for a second consecutive month and news that Iraq will reduce its exports in coming months.

Moreover, continued drone attacks on oil processing facilities in Russia from Ukraine influenced trading to a degree: Vandana Hari, founder of Vanda Insights, said, "The strikes on Russian refineries added $2-$3 per barrel of risk premium to crude last week, which remains in place as we start this week with more attacks over the weekend."

Brent settled up $1.55 at $86.89 per barrel, while West Texas Intermediate settled up $1.68 at $82.72.

The Ukraine attacks combined with the recently agreed to extended output cuts from the Organization of the Petroleum Exporting Countries (OPEC) were said to have caused Morgan Stanley to raise its Brent price forecast by $10 per barrel to $90 for the third-quarter of 2024.

Data released Monday showed that China's crude oil throughput in January and February rose 3 percent compared to the same two months in 2023, to meet strong demand for transport fuels over the Lunar New Year travel period; also, factory output and retail sales beat expectations in the January-February period.

In related news, tanker-tracking data from Kpler revealed that China is expected to import record-high oil volumes from Russia in March: imports of Sokol are expected to hit a record high of 379,000 barrels per day (bpd) this month, tripling from the February imports of this Russian grade; also, imports of the ESPO grade from Russia are expected to hit 882,000 bpd in March.

Bloomberg earlier reported that tankers loaded with Sokol and idling offshore Singapore since December have started moving towards China's shores. 

Meanwhile, trading later this week could well be influenced by the highly anticipated outcome of the U.S. Federal Reserve's two-day meeting that ends on Wednesday; Tony Sycamore, a market analyst with IG, told media the Fed will likely keep rates unchanged this month, but the chance of a rate cut at the June meeting "is now a coin flip."