Global Oil Prices Steady Amid OPEC+ Supply Curbs and U.S. Summer Demand
Oil Prices Stabilize
Global oil prices steadied on Tuesday, balancing the prospect of OPEC+ maintaining oil supply curbs at its June 2 meeting with hopes for strong U.S. summer fuel demand against concerns about prolonged higher U.S. interest rates.
Monday’s Market Movements
On Monday, oil prices rose over 1% in muted trade due to public holidays in Britain and the United States. The start of the U.S. summer driving and vacation season fueled optimism for strong fuel demand.
Current Oil Prices
Brent Crude
The global benchmark for Brent rose by 17 cents or 0.2% to $83.27 a barrel by 0810 GMT.
WTI Crude
U.S. West Texas Intermediate (WTI) crude was at $78.79, up $1.07 or 1.4% from Friday's close. The WTI traded through the U.S. Memorial Day holiday without a settlement.
Market Sentiment
Tamas Varga of broker PVM noted that despite the recent positive mood, concerns about interest rates would likely hinder significant price increases in the near term. Varga also suggested that no changes in production levels are expected from the upcoming OPEC+ meeting.
Interest Rate Concerns
Last week, worries over U.S. interest rates remaining elevated contributed to a weekly loss in crude prices. Higher rates increase borrowing costs, which can dampen economic activity and reduce oil demand.
Healthy Oil Demand Growth
Despite the potential impact of high interest rates, UBS analyst Giovanni Staunovo indicated that real-time mobility data shows robust oil demand growth.
Air Travel Indicators
Data from flight analytics firm OAG revealed that U.S. seat numbers on domestic flights in May rose by 5% month-on-month and almost 6% year-on-year to slightly above 90 million, surpassing 2019 levels.
OPEC+ Meeting Expectations
An online meeting of OPEC+ producers is scheduled for Sunday, where traders and analysts expect the 2.2 million barrels per day of voluntary production cuts to remain in place, likely supporting prices further.
Price Predictions
Satoru Yoshida, a commodity analyst with Rakuten Securities, anticipates that oil prices will rise in the coming days, citing expected continued voluntary output cuts by producers. The beginning of the U.S. driving season is also expected to provide additional support.
Key Takeaways
Stable Oil Prices
Balancing OPEC+ supply curbs and U.S. summer demand against higher U.S. interest rate concerns.
Recent Gains
Oil prices rose over 1% on Monday due to public holidays in the U.S. and UK.
Steady Market: Current prices show slight increases for both Brent and WTI crude.
Interest Rate Impact: Concerns about high interest rates potentially dampening future price increases.
Strong Demand
Healthy real-time oil demand growth and increased air travel.
OPEC+ Cuts: Expected continuation of voluntary production cuts to support prices.
Optimistic Outlook: Anticipation of higher oil prices with the start of the U.S. driving season.
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