Oil Gains on Expectations for Higher Demand and as Middle East Concerns Rise

File photo: An oil pumpjack in a field on March 24, 2024 in Grandfalls, Texas. Brandon Bell/Getty Images/AFP

Oil prices rose on Tuesday, underpinned by signs that demand may improve China and the US, the world's biggest oil consuming nations, and growing concerns of a widening conflict in the Middle East that could affect supply from the region.
Brent futures for June delivery rose 41 cents to $87.83 a barrel by 0440 GMT. US West Texas Intermediate (WTI) crude futures for May rose 41 cents to $84.12 a barrel, after reaching its highest close since Oct. 27 in the previous session.
"The bullish catalysts for oil prices continue to pile up, with stronger-than-expected economic conditions in China and the US offering a more optimistic demand outlook, while geopolitical tensions in the Middle East continue to heat up with the involvement of Iran," said IG market strategist Yeap Jun Rong in an email.
Manufacturing activity in March in China expanded for the first time in six months and in the US for the first time in 1-1/2 years, which should translate to rising oil demand this year. China is the world's largest crude importer and second-largest consumer while the US is the biggest consumer.
In the Middle East, an Israeli strike on Iran's embassy in Syria killed seven military advisors, among them three senior commanders, marking an escalation in the war in Gaza between Israel and Hamas, which is supported by Iran. A widening of the conflict that has stretched for nearly half a year to include Israel directly fighting Iran has sparked concerns about impacts on oil supply.
"To date, the market hasn't been worried about supply disruptions, with the war remaining contained. Iran’s involvement could see its oil supply under threat," ANZ analysts wrote in a note.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, will hold an online meeting of its Joint Ministerial Monitoring Committee on Wednesday to review the market and members' implementation of output cuts.