Oil prices steady despite expectations of tighter supply

London — Oil prices were steady on Monday near five-month highs as markets expect tighter supply from Opec+ cuts and attacks on Russian refineries, while upbeat Chinese manufacturing data supported an improving demand outlook.

Brent crude was 10c lower at $86.90 a barrel by 11.15am GMT after rising 2.4% last week. US West Texas Intermediate crude was at $83.14 a barrel, down 3c after a 3.2% gain last week.

Trading volumes were thin as markets in several countries remained closed for the Easter holidays.

Both benchmarks posted a third consecutive month of gains in March, with Brent holding above $85 a barrel since the middle of March.

The Organisation of the Petroleum Exporting Countries (Opec) and its allies, a group known as Opec+, has pledged to extend production cuts to the end of June which could tighten crude supply during summer in the northern hemisphere.

Russian deputy prime minister Alexander Novak said on Friday that the country’s oil companies would focus on reducing output rather than exports in the second quarter to evenly spread production cuts with other Opec+ members.

Drone attacks from Ukraine have knocked out several Russian refineries, which is expected to reduce Russia’s fuel exports.

“Geopolitical risks to crude and heavy feedstock supplies add to strong (second-quarter) demand fundamentals,” Energy Aspects analysts said in a note.

Almost 1-million barrels per day (bpd) of Russian crude processing capacity was offline from the attacks, affecting its high-sulphur fuel oil exports which were processed at Chinese and Indian refineries, the consultancy added.

In Europe, oil demand was firmer than expected, rising 100,000 bpd on the year in February, Goldman Sachs analysts said, versus its forecast of a 200,000 bpd contraction in 2024.

Meanwhile, China’s manufacturing activity expanded for the first time in six months in March, an official factory survey showed on Sunday, supporting oil demand in the world’s largest crude importer, even as a crisis in the property sector continues to drag on the economy.

Reuters