Crude Oil posts second monthly gain on tight supply

Crude Oil prices ended Thursday’s trading session lower but gained the previous two months due to expectations of a tighter supply and a possible U.S. interest rate decrease in the summer after data showed inflation was declining. Concerns about rising interest rates have been a major burden on the oil market because demand and the economy typically decline in high-rate environments.

The Middle East conflict has had little effect on crude flows, with global benchmark Brent remaining comfortably above the $80 threshold for the past three weeks. April delivery Brent futures ended the day at $83.62 per barrel, down 6 cents. WTI  lost 28 cents to close at $78.26 a barrel. Both benchmarks concluded February with a gain for the second month in a row.

Positive attitude and expectations for tighter markets this year were also bolstered by expectations that OPEC and its partners, or OPEC+, would continue their cutbacks into the second quarter. The present production limitations implemented by OPEC+ are projected to be sustained until the end of 2024.

Early in March, OPEC+ will convene to decide whether to continue limiting oil production. The group decided in November to reduce production by 2 points to 2 million barrels per day in Q1 voluntarily. Growing anticipations for output reductions coincide with the U.S. The output slightly decreased from record highs. The Energy Information Administration released data on Thursday showing that the production of crude oil decreased to 13,315 million barrels per day in December, from the record 13,314 million barrels per day in November.

In terms of supply, crude stocks in the U.S. official data revealed on Wednesday that the world’s largest producer has increased for a fifth straight week, rising by 4 point 2 million barrels, exceeding projections of a 2 point 7 million-barrel build.

Nevertheless, concerns about a slowdown in Chinese demand increased when a significant state-owned producer issued a warning, stating that the world’s biggest crude importer anticipated flatlined oil consumption this year. Israel and Hamas both downplayed the possibility of a truce in their war in Gaza, indicating that the Middle East conflict was far from over.