The hope of strong fuel demand from the US during its driving season provides support, while traders await Opec+ meeting
28 May 2024 - 07:16
byYuka Obayashi and Trixie Yap
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Tokyo — Oil prices climbed in Asian trade on Tuesday, extending gains from the previous session, buoyed by the expectation of strong fuel demand from the US during the summer, ahead of an output policy decision from Opec+ at a June 2 meeting.
July Brent crude rose 21c to $83.31 a barrel by 3.29am GMT. The more-active August futures rose 21c to $83.09.
US West Texas Intermediate (WTI) crude futures for July were at $78.90 a barrel, up $1.18, or 1.52%, from Friday’s close, having traded through a US holiday to mark Memorial Day without a settlement.
Oil prices rose more than 1% on Monday in muted trade owing to public holidays in Britain and the US after a downbeat week characterised by the outlook for US interest rates in the face of sticky inflation.
The expectation of strong fuel demand with the start of the US summer driving and vacation season provided price support, some analysts said.
Despite the general view that higher-for-longer interest rates could result in weak oil demand growth, “real-time mobility data indicates oil demand growth is still broadly healthy”, said UBS analyst Giovanni Staunovo in a client note.
On the air travel front, US seat numbers on domestic flights for May rose by 5% month on month and almost 6% year on year to slightly more than 90-million, data from flight analytics firm OAG showed, surpassing 2019 levels. International flight seat numbers for May rose by 11% year on year to about 14.2-million, with the levels also 8% higher than the same period in 2019, the data showed.
Meanwhile, all eyes will also be on the upcoming online meeting of the Opec+ on June 2, where traders and analysts are expecting production cuts to stay in place and buoy prices further.
“We expect oil prices to move higher in the coming days due to anticipated continued voluntary output cuts by oil producers and growing prospects for easing of US monetary policy,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
Yoshida added that the beginning of the US driving season will also provide support.
Earlier, three sources from Opec+ countries said an extension on voluntary output cuts of 2.2-million barrels a day into the second half of the year was likely.
A slight decline in the dollar also underpinned markets.
“Extending positive momentum from the last two sessions, crude oil prices seemed to have stabilised on Tuesday morning as a pullback in the US dollar also aids the bullish outlook,” said senior market analyst at Phillip Nova, Priyanka Sachdeva.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil gains more ground on US demand expectation
The hope of strong fuel demand from the US during its driving season provides support, while traders await Opec+ meeting
Tokyo — Oil prices climbed in Asian trade on Tuesday, extending gains from the previous session, buoyed by the expectation of strong fuel demand from the US during the summer, ahead of an output policy decision from Opec+ at a June 2 meeting.
July Brent crude rose 21c to $83.31 a barrel by 3.29am GMT. The more-active August futures rose 21c to $83.09.
US West Texas Intermediate (WTI) crude futures for July were at $78.90 a barrel, up $1.18, or 1.52%, from Friday’s close, having traded through a US holiday to mark Memorial Day without a settlement.
Oil prices rose more than 1% on Monday in muted trade owing to public holidays in Britain and the US after a downbeat week characterised by the outlook for US interest rates in the face of sticky inflation.
The expectation of strong fuel demand with the start of the US summer driving and vacation season provided price support, some analysts said.
Despite the general view that higher-for-longer interest rates could result in weak oil demand growth, “real-time mobility data indicates oil demand growth is still broadly healthy”, said UBS analyst Giovanni Staunovo in a client note.
On the air travel front, US seat numbers on domestic flights for May rose by 5% month on month and almost 6% year on year to slightly more than 90-million, data from flight analytics firm OAG showed, surpassing 2019 levels. International flight seat numbers for May rose by 11% year on year to about 14.2-million, with the levels also 8% higher than the same period in 2019, the data showed.
Meanwhile, all eyes will also be on the upcoming online meeting of the Opec+ on June 2, where traders and analysts are expecting production cuts to stay in place and buoy prices further.
“We expect oil prices to move higher in the coming days due to anticipated continued voluntary output cuts by oil producers and growing prospects for easing of US monetary policy,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
Yoshida added that the beginning of the US driving season will also provide support.
Earlier, three sources from Opec+ countries said an extension on voluntary output cuts of 2.2-million barrels a day into the second half of the year was likely.
A slight decline in the dollar also underpinned markets.
“Extending positive momentum from the last two sessions, crude oil prices seemed to have stabilised on Tuesday morning as a pullback in the US dollar also aids the bullish outlook,” said senior market analyst at Phillip Nova, Priyanka Sachdeva.
Reuters
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