Oil Prices Surge Amid Geopolitical Tensions and Strong Chinese Economic Data

Drone Attacks on Russian Refineries and China's Economic Performance Drive Oil Market Momentum

Mar 18, 2024 - 12:14
Mar 18, 2024 - 12:14
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Oil Prices Surge Amid Geopolitical Tensions and Strong Chinese Economic Data
Oil Prices Surge Amid Geopolitical Tensions and Strong Chinese Economic Data

Oil prices surged to a four-month high as geopolitical tensions escalated and robust Chinese economic data exceeded expectations.

Over the weekend, Ukrainian drone attacks targeted Russian refineries, heightening concerns about potential disruptions to global oil supply chains. These attacks added to existing geopolitical uncertainties and contributed to a surge in oil prices.

Simultaneously, key economic indicators from China revealed stronger-than-expected factory output and investment at the beginning of the year. Additionally, China reported a record amount of crude refining, signaling robust demand for oil in the world's second-largest economy.

The combination of refinery strikes in Russia and positive economic data from China propelled oil prices higher. West Texas Intermediate (WTI) crude climbed by as much as 1.3% to surpass $82 per barrel, building on last week's gains.

The impact of the refinery attacks was felt particularly in diesel and gasoline futures markets, which rose for the fourth and sixth consecutive sessions, respectively. Gasoline futures reached a six-month high, prompting speculation about potential implications for both pump prices and crude oil prices if the rally continues.

Analysts noted that the refinery strikes added a risk premium of $2 to $3 per barrel to crude oil prices, reflecting market concerns about supply disruptions. Despite efforts by OPEC+ to curb production, the International Energy Agency warned of a supply deficit throughout the year, further supporting the upward momentum in oil prices.

The recent surge in oil prices marks a breakout from the tight trading range observed earlier in the year and underscores the market's sensitivity to geopolitical events and economic data. As tensions persist and demand remains strong, market analysts anticipate continued volatility in the oil markets in the coming weeks.

Also Read: US Retains Top Spot in Global Oil Production for Sixth Consecutive Year, Says EIA

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