Investing.com — Oil prices climbed strongly Tuesday, with the global benchmark contract hitting its highest level this year, on fresh concerns to global supply following signs of demand picking up.
By 09:15 ET (14.15 GMT), the futures traded 1.5% higher at $84.94 a barrel and the Brent contract climbed 1.3% to $88.59 a barrel, rising above $88 for the first time since October.
Ukrainian drone hits Russian refinery
A Ukrainian drone struck Russia’s third largest oil refinery on Tuesday, hitting a unit that processes about 155,000 barrels of crude per day.
Although the damage is not meant to be significant, any damage to Tatneft’s Taneco refinery, which has an annual production capacity of more than 17 million tons, would add to concerns that global supply will not be enough to match recovering demand.
Russia has been contending with a spate of Ukrainian attacks on its oil refineries, impacting supplies from one of the largest exporters of oil products in the world.
Raised geopolitical tensions
This damage comes as a suspected Israeli air strike against Iran’s consulate in the Syrian capital Damascus has added to the geopolitical tensions in the Middle East.
Israel is at war against the Iran-backed Palestinian group Hamas in Gaza, but the strike risks direct Iranian involvement in the conflict, which could result in more disruptions to crude supplies from the oil-rich region.
The Organization of the Petroleum Exporting Countries and allies led by Russia, a group known as OPEC+, will hold an online joint ministerial monitoring committee meeting on Wednesday to review the market.
OPEC+ members, led by Saudi Arabia and Russia, last month agreed to extend voluntary output cuts of 2.2 million barrels per day to support the market.
Further cuts are unlikely ahead of the June meeting when these voluntary curbs to output are set to expire, with the total cuts by OPEC+ set to decline to 3.66 million barrels a day.
Signs point to growing demand
On the demand side, data released earlier this week showed that manufacturing activity in China expanded for the first time in six months in March and in the U.S. for the first time in well over a year.
This is likely to translate to rising oil demand, given China is the world’s largest crude importer and second-largest consumer while the U.S. is the biggest consumer.
Similar data in Europe, earlier Tuesday, showed that reported their first overall growth in activity in 20 months in March.
The news was less impressive in the eurozone, as the region’s contracted at a steeper pace than in February.
API crude stockpiles due
The latest data concerning U.S. crude stockpiles are due later in the session, with a draw of around 2 million barrels expected when the released its weekly numbers.
Last week’s release from the industry body showed that crude inventories increased by about 9.3 million barrels for the week ended March 22, compared with a decline of 1.5 million barrels reported by the API for the previous week.
