Oil Prices Are Set to Extend Their String of Weekly Gains

Crude oil prices were set to end the week with yet another increase, extending a three-week string of gains amid expectations that the latest round of U.S. sanctions against Russia would affect global supply.

Prices could receive additional support now from the latest GDP data from China, which showed the country hit its target for 2024, at 5%, versus analyst expectations of 4.9% growth. Even with forecasts about peak demand for crude oil, China’s economy is still dependent on hydrocarbons, meaning the news is bullish for crude.

“Supply concerns from U.S. sanctions on Russian oil producers and tankers, combined with expectations of a demand recovery driven by potential U.S. interest rate cuts, are bolstering the crude market,” Toshitaka Tazawa from Fujitomi Securities told Reuters earlier today.

At the start of the week, ING’s commodity strategy head Warren Patterson warned the sanctions could wipe out the expected oversupply in oil this year but noted that the actual lost volumes of Russian oil could be lower.

“Some buyers may choose to ignore these sanctions, and Russia may also rely more heavily on those tankers in the shadow fleet that are not sanctioned to continue the trade,” Patterson wrote on Monday.

Meanwhile, however, some of the largest buyers of Russian crude are currently in a race to find replacement volumes elsewhere, which is pushing freight rates higher, adding to oil-related costs.

Looking forward, as China braces for a trade war with the United States, the bullish aura of crude may pale somewhat. On the other hand, in the U.S. itself analysts see inflation continuing down, which would motivate another interest rate cut in the near future. That would be a bullish signal for crude. Another bullish signal came from the Middle East, where the Yemeni Houthis are expected to announce an end to their attacks on ships in the Red Sea following the ceasefire deal between Israel and Hamas.