Oil futures: Crude registers fresh 4-month highs on upbeat China data

Quantum Commodity Intelligence – Crude oil futures started week on a firm footing Monday in extending the rally, as benchmarks registered fresh four-month highs following the release of Chinese economic data.

Front-month May24 ICE Brent futures were trading at $87.14/b (1935 GMT), compared to Friday's settle of $85.34/b, just short of the day's high of $87.18/b, which in turn was a near five-month high for the same contract. 

At the same time, Apr24 NYMEX WTI was trading at $83.04/b, versus Friday's settle of $81.04/b, while the more-liquid May24 contract was trading at $82.43/b.   

Oil markets picked up where they left off last week, given a further lift after firm early-year data from China boosted optimism on economic growth for the world's largest crude importer.

Retail sales surged a healthy 5.5% in the first two months of the year, beating the 5.2% predicted in a Reuters poll, while industrial production ramped up 7%, also comfortably outstripping forecasts of 5% growth.

However, China's property sector and spiraling debt levels remain a concern as investments in the sector tumbled 9.6% during the first two months of the year, reported the South China Morning Post.

Rally

Benchmarks rallied around 4% last week, initially on US inventory data and repeated strikes taking out a significant proportion of Russia's processing capacity. This was followed up by the IEA report at the backend of the week, which lifted markets to fresh highs.

"WTI and Brent crude oil reached four-month highs after the IEA flipped their 2024 supply and demand forecast to a deficit amid an expected prolonged period of production cuts from OPEC+," commented Saxo Bank analyst Ole Hansen, while the agency also increased its demand forecast.

Morgan Stanley is the latest bank to raise its price forecast, increasing projections for Q3 Brent from $80/b to $90/b. Earlier this month Goldman and Citbank also flagged expected higher prices.

Prospects for global trade have also picked up according to Rolf Habben Jansen, CEO of Hapag-Lloyd, the world's fifth-largest ocean carrier, despite China's stuttering recovery and ongoing disruptions to commercial shipping via the Red Sea.

"We also see that inventories are depleted in many cases and so far we've seen a good recovery after Chinese New Year," Jansen told CNBC.

But tensions in and around the Red Sea remain elevated as Houthi rebels vow to continue attacks after US forces intercepted several drone boats over the weekend.

Meanwhile, Israel is expected to send a negotiating team to Doha on Monday for the latest round of indirect talks with Hamas in a bid to secure a temporary truce in Gaza in return for the release of hostages.

Talks had hit an impasse after Israel refused to agree to a timeline for a permanent ceasefire. Israeli Prime Minister Benjamin Netanyahu vowed Sunday to send ground forces into Gaza's southern city of Rafah despite growing international concerns over the humanitarian crisis.