June 10 2024: Oil prices edged higher on Monday, supported by hopes for increased fuel demand during the summer. However, gains were limited by a stronger dollar amid diminishing expectations for immediate U.S. interest rate cuts.
Goldman Sachs analysts predict Brent crude will rise to $86 per barrel in the third quarter. They cited solid summer transport demand, which they believe will push the oil market into a third-quarter deficit of 1.3 million barrels per day (bpd).
As of 0950 GMT, Brent crude futures increased by 16 cents, or 0.2%, to $79.78 per barrel, while U.S. West Texas Intermediate crude futures rose by 6 cents to $75.59.
UBS analysts noted in a report, “We believe current market positioning is overly pessimistic, considering that we expect larger oil inventory declines over the next few weeks.”
Oil experienced a third consecutive weekly loss last week due to concerns that a plan by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known
as OPEC+, to unwind some production cuts from October will contribute to rising supply.
Despite the OPEC+ cuts, oil inventories have increased. In the latest week, U.S. crude and gasoline stocks both rose. Energy consultancy FGE also expects oil prices to rally, projecting prices to reach the mid-$80s by the third quarter.
“We continue to expect the market to firm up,” FGE stated. “But it will likely need a convincing signal of tightening from preliminary inventory data.”
A strong dollar has weighed on the market, with the currency strengthening after Friday’s U.S. jobs data led investors to adjust their expectations for interest rates. The euro also fell after French President Emmanuel Macron called a snap parliamentary election.
A stronger U.S. currency makes dollar-denominated commodities such as oil more expensive for holders of other currencies.
