Oil Prices Hold Near Two-Month Highs Amid Expectations of Rising Demand
In the bustling city of New Delhi, oil prices remained steady on Tuesday, hovering near the two-month highs achieved in the previous session. Analysts anticipate a surge in fuel demand during the summer travel season and potential US interest rate cuts that could stimulate economic growth, reported by Reuters.
Brent Crude Futures Inch Up
Brent crude futures inched up by 28 cents to reach $86.88 per barrel by 9:34 a.m. Saudi time, following a 1.9 percent increase in the previous session – marking the highest close since April 30.
US West Texas Intermediate Crude on the Rise
US West Texas Intermediate crude also saw a rise of 20 cents, reaching $83.58 a barrel after a 2.3 percent gain, hitting its highest point since April 26.
Fear and Sentiment Driving Oil Prices
Oil market analyst Vandana Hari of Vanda Insights noted that the movement in oil prices seems to be more fear and sentiment-driven rather than based on fundamentals. Factors such as the outlook for summer fuel demand, potential conflict between Israel and Iran, and the impact of Hurricane Beryl are contributing to the price movements.
Summer Travel Season Boosting Gasoline Demand
Gasoline demand in the US, the largest oil consumer globally, is expected to rise as the summer travel season kicks off with the Independence Day holiday. The American Automobile Association predicts a 5.2 percent increase in travel during the holiday period compared to 2023, with car travel alone expected to rise by 4.8 percent.
Supply Disruptions on the Horizon
Market participants are preparing for possible disruptions from Hurricane Beryl on US oil refining and offshore production. However, current forecasts suggest the storm is likely to move into Mexico’s Bay of Campeche, impacting oil production in that region.
Potential Rate Cuts by the Federal Reserve
With signs of easing inflation in the US, there is renewed hope that the Federal Reserve may consider cutting interest rates, potentially in September. Reports of US manufacturing activity contracting for a third consecutive month and a drop in prices paid by manufacturers for certain inputs are reinforcing the case for rate cuts.
Challenges in Demand Growth
Despite the positive outlook, challenges in demand growth have limited the gains in oil prices. Data indicates that crude imports to Asia, the largest oil-consuming region globally, were lower in the first half of 2024 compared to the previous year, primarily due to reduced imports into China, the world’s largest oil importer and second-largest consumer.