Brent crude traded at $83.5/bbl on the first day of March after surging by around 2% from February’s close, due to expectations that OPEC+ would extend voluntary supply cuts. The group later announced a 2.2 million barrel per day increase in production cuts until Q2 of this year, attempting to combat rising non-OPEC production in the US, Guyana, Brazil and Canada, as well as a weak demand sentiment. Chinese economic growth remained uncertain, and the China National Petroleum Corporation stated that the nation’s oil demand has entered a low-growth phase due to decarbonisation reducing fossil fuel consumption, causing  Brent crude to decline to $82/bbl by mid-month. However, OPEC maintained strong oil demand growth forecasts for this year and next, and declining US crude stocks indicated an improving demand sentiment. Persistent geopolitical tensions also supported prices, with intensified Red Sea attacks and Ukrainian drone attacks on Russian energy facilities, causing Brent to climb above $87/bbl. Towards month-end, Russian missiles targeted Ukraine’s energy infrastructure, and Kyiv also came under renewed Russian attack. Although a ceasefire in the Middle-East appeared increasingly optimistic, Israel recalled negotiators from Qatar and ended immediate attempts to negotiate a ceasefire with Hamas. Finally, a build in US crude stocks indicated a weak demand sentiment in the final week of March, causing Brent crude to close around $86/bbl.

GBP started March at $1.265 against USD, climbing to its highest level since July 2023 at $1.288 by mid-month, before falling back towards $1.263. At the beginning of March, economists maintained predictions of a shallow recession. The British Chambers of Commerce (BCC) upgraded growth expectations for 2024 and 2025, and Ernst & Young also forecast an optimistic forward outlook of lower inflation and a strong labour market. Additionally, Jeremy Hunt’s spring budget was released, announcing expansionary fiscal measures including tax cuts, aimed at fostering economic growth. A resilient economy, indicated by gross domestic product (GDP) rising for the first time since a recession was declared, led to expectations that the Bank of England would delay interest rate cuts. However, inflation unexpectedly fell to 3.4% in February, and the bank hinted at potential cuts in the summer with Governor Andrew Bailey claiming that the UK is “on the way” to beating inflation. Prime Minister Rishi Sunak also said the UK economy has “turned the corner”, vowing that Britain will bounce back in 2024. Meanwhile, the US Federal Reserve also held interest rates, and despite projecting interest rate cuts, inflation has remained firmer than expected. Towards month-end, data revealed that UK consumer spending stalled in February, and GBP closed March at $1.263 against USD.

In March, geopolitical uncertainty continued to significantly impact the energy market. In the first week, US Vice President Kamala Harris called for an immediate Israel-Hamas ceasefire, however Israeli Prime Minister Benjamin Netanyahu vowed to press ahead with the invasion of the southern Gaza city of Rafah, deemed the last safe zone for civilians in the area. Despite ceasefire negotiations, Israel recalled negotiators from Doha after claiming talks were “at a dead end” due to demands by Hamas. Furthermore, the Russia-Ukraine energy war intensified Ukrainian drones targeted more than seven Russian refineries in March, and Russia retaliated and left a million people without power in Ukraine. In climate-related news, data revealed that global energy emissions of CO2 hit a record high in 2023 (International Energy Agency). EU countries agreed to quit the 1998 Energy Charter Treaty, which allows companies to sue governments over policies damaging investments, following concerns it undermines efforts to fight climate change. In the UK, the National Audit Office (NAO) warned that the low uptake of heat pumps is slowing the nation’s decarbonisation efforts. Finally, Britain’s National Grid proposed a £58 billion investment programme to boost grid networks beyond 2030 to help achieve 2035 decarbonisation targets.