In Asian trading on Wednesday, oil prices saw an uptick as market participants anticipated major producers to uphold output cuts at an upcoming meeting on Sunday. Additionally, with the onset of the peak summer demand season, fuel consumption is expected to escalate, further buoying prices.
Brent crude futures for July delivery gained 18 cents, or 0.2%, reaching $84.40 a barrel by 0630 GMT, while U.S. West Texas Intermediate futures for July climbed 28 cents, or 0.3%, to $80.11. Both benchmarks registered over 1% gains on the preceding day.
Analysts and traders foresee the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, collectively known as OPEC+, to uphold voluntary production cuts amounting to approximately 2.2 million barrels per day.
Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, remarked that the extension of output cuts by OPEC+ members is viewed positively by the markets, reflecting a concerted effort to stabilize prices and rebalance the global oil market. Sachdeva also noted the onset of the summer driving season in the U.S., traditionally leading to increased consumption and fostering a positive momentum in crude oil prices.
The Memorial Day holiday in the U.S., commencing the peak demand season, is anticipated to further bolster consumption, particularly in the world’s largest oil-consuming nation. Daniel Hynes, senior commodity strategist at ANZ Bank, highlighted robust holiday travel figures and strong air travel trends, reinforcing optimism regarding consumption patterns.
Amidst heightened tensions in the Gaza Strip, as Israeli tanks advanced towards Rafah, concerns regarding potential escalation of conflict in the broader Middle East provided additional support to prices, given the region’s significance as a key supply hub.
Investors are also eyeing the release of U.S. crude inventory data by the American Petroleum Institute later in the day, delayed due to the Memorial Day holiday. Expectations indicate a projected decline of approximately 1.9 million barrels in crude oil stockpiles for the previous week, according to a preliminary Reuters poll.
Furthermore, market participants are awaiting U.S. inflation data this week, which could influence expectations for Federal Reserve interest rate adjustments and subsequently impact oil prices. The U.S. core Personal Consumption Expenditures Price Index report for April is slated for release on Friday, with expectations of maintaining stability on a monthly basis amidst fluctuating sentiments regarding the timing of rate cuts, amidst persistent concerns over inflation.