Commodity market update: Oil Prices Rebound on Positive Manufacturing Data

Commodity market update: oil prices have experienced a notable rebound, driven primarily by encouraging manufacturing data from China.

Oil Price Movements

Brent crude rose by 76 cents, or 1%, reaching $73.57 per barrel by 0206 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude climbed 75 cents, or 1.1%, to $70.51 per barrel.

Source: investing.com

Positive Manufacturing Data from China

The uptick in prices followed the release of official data on Saturday, which indicated that manufacturing activity in China expanded at its fastest pace in three months during February. This growth was attributed to increased new orders and higher purchase volumes, leading to a solid rise in production. Investors are now looking ahead to China’s annual parliamentary meeting on March 5 for additional measures to support its struggling economy.

IG market analyst Tony Sycamore noted that one of the key drivers behind the price increase was the China NBS manufacturing PMI moving back into expansionary territory over the weekend. However, he also warned that the economic outlook might remain bleak due to impending tariffs on exports to the U.S., set to take effect on March 4.

Oil Prices Analysts' Perspectives

Goldman Sachs analysts expressed a cautiously optimistic view, stating that the manufacturing data suggests stable to slightly improved economic activity in China for early 2025. Nevertheless, they cautioned that the new 10% U.S. tariff could provoke retaliatory measures, impacting market sentiment.

Last month, both Brent and WTI experienced their first monthly decline in three months, as fears surrounding U.S. tariffs and trade tensions dampened investor confidence in global economic growth. This uncertainty has reduced appetite for riskier assets.

Broader Oil Market Sentiment

Overall market sentiment improved following a summit on Sunday, where European leaders demonstrated strong support for Ukrainian President Volodymyr Zelenskiy. They pledged to enhance assistance to Ukraine, just two days after Zelenskiy had a contentious meeting with U.S. President Donald Trump.

Zelenskiy expressed optimism about salvaging his relationship with Trump, suggesting that discussions would continue behind closed doors. He also indicated readiness to finalize a minerals deal with the United States, believing that the U.S. would reciprocate.

Geopolitical Concerns

Ongoing attacks on Russian refineries have raised concerns about the country’s refined product exports. A report indicated that another plant in the Russian city of Ufa was on fire, further complicating the supply situation.

Future Oil Price Forecasts

Looking ahead to 2025, analysts are maintaining their oil price forecasts, with Brent expected to average around $74.63 per barrel. They anticipate that any effects from potential U.S. sanctions will be balanced by ample supply and the possibility of a peace agreement between Russia and Ukraine, according to a recent Reuters poll.

Looking ahead, oil prices appear poised for a consolidation phase around current levels unless a significant catalyst emerges, a modest pace that aligns with economic recovery but falls short of pre-pandemic trends. Supply is expected to rise, driven by non-OPEC+ producers like the U.S., suggesting a potential surplus later in the year if OPEC+ opts for its output hike.

The manufacturing data has injected fresh bullishness, but traders remain wary of overbought conditions and policy risks. The consensus leans toward a range-bound market in March, with upside potential if China’s economic stimulus gains traction or OPEC+ tightens supply further. Downside risks include a stronger-than-expected U.S. dollar—bolstered by Trump’s trade policies—or a faltering global recovery.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.