WASHINGTON (DTN) -- After back-and-forth trade for most of the session, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Monday with modest gains underpinned by the potential for Organization of the Petroleum Exporting Countries and Russia-led allies to extend deep production quotas into next month amid an alarming spike in coronavirus infections in India and Brazil -- markets driving global oil demand growth -- and renewed quarantine restrictions in the European Union where a sluggish vaccine rollout has prompted concerns over a double-dip recession.
On the session, West Texas Intermediate May contract advanced 59 cents to settle at $61.56 barrel (bbl) and Brent May contract on ICE climbed 41 cents to close out just below $65 bbl. NYMEX April ULSD futures settled little changed at $1.8098 gallon and the front-month RBOB contact rallied 2.79 cents or 1.5% for a $1.9952 gallon settlement.
Oil futures recouped earlier losses triggered by news the large Ever Given container ship that ran aground and become wedged in the Suez Canal for nearly a week was refloated, unblocking the passage in one of the world's busiest waterway trade routes. Even still, traders expect the weeklong blockage of the canal would lead to material loading delays in U.S. and European ports next month, further rattling global supply chains. There were more than 300 ships awaiting passage through the canal earlier Monday. Shipping giant Maersk estimates the ripple effect of the shipping delays could last for weeks if not months.
Apart from the Suez Canal, investors are now looking towards this week's meeting among members of the OPEC+ coalition scheduled for Wednesday and Thursday, with consensus calling for a renewed rollover of 7.05 million barrels per day (bpd) in crude oil production cuts into May.
There are two questions that are likely to concern traders before locking in positions on the assumption the cuts will be rolled over, however. Will Russia continue to support the agreement in the face of rising U.S. production? And will Saudi Arabia again extend the unilateral 1 million bpd production cut for a fourth month in May, with the restrained output atop of the OPEC+ quotas.
U.S. oil production rebounded to 11 million bpd during the week ended March 19, according to the Energy Information Administration, up from a February low 9.7 million bpd.
Further lending support to the oil complex, China's National Bureau of Statistics over the weekend reported industrial profits in the world's second largest economy surged to $169.7 billion in the January-February period, up 179% from a year earlier, reflecting a dramatic rebound in global demand for China's manufactured goods. Even if last year's numbers represent a low comparison base -- China's industrial profits fell 38.3% in the first two months of 2020 because of the pandemic -- they are still up 72.1% from the comparable period in 2019.
As consumer spending on services have been curtailed by the pandemic, demand for manufactured goods surged, juiced by massive stimulus measures in the United States and European Union.
Meanwhile, diplomatic relations between China and the West took another gut punch after Beijing signed a 25-year strategic partnership with Iran in blatant disregard of U.S. sanctions. The accord reportedly brings Iran into China's Belt and Road Initiative, a multi-trillion-dollar infrastructure plan intended to stretch from East Asia to Europe.
U.S. Trade Representative Katherine Tai said Sunday the United States is not ready to lift tariffs on Chinese imports imposed by the previous administration.
Liubov Georges can be reached at email@example.com