What’s weighing on oil prices?

• According to data released by the Commerce Department, the Personal Consumption Expenditures (PCE) price index in the United States, considered the Federal Reserve’s favored measure of inflation, eased in February. This moderation was driven by a notable slowdown in the costs of services excluding housing and energy. Analysts interpret this trend as potentially leaving room for a Federal Reserve interest rate cut in June. Lower interest rates tend to lower the expense of purchasing goods and services, potentially stimulating economic expansion and driving up demand for oil.
• Manufacturing activity in China saw its first expansion in six months in March, according to an official factory survey. This development bolsters oil demand in the world’s largest importer of crude. Additionally, China has pledged to increase its import of high-quality products and services from France. This commitment follows a European investigation into Chinese electric vehicle exports, backed by Paris, which had the potential to escalate into a trade dispute between the two nations.
• A central bank survey revealed that optimism within Japan’s services sector reached its highest point in 33 years during the first quarter. This surge is attributed to the booming tourism industry and increased profits resulting from price hikes.
• In Russia, as part of OPEC+, Deputy Prime Minister Alexander Novak announced that the nation’s oil companies will prioritize reducing production over exports during the second quarter. This strategy aims to ensure a balanced distribution of production cuts among OPEC+ members, which includes both the Organization of the Petroleum Exporting Countries and allied producers.
• Ukrainian drone strikes have taken down multiple Russian refineries, leading to an anticipated decline in Russia’s fuel exports. Approximately 1 million barrels per day (bpd) of Russian crude processing capability has been rendered inactive due to these strikes. This disruption is impacting Russia’s exports of high-sulfur fuel oil, which are typically processed at refineries in China and India.

(With inputs from Reuters)