May 29 2024: Oil prices advanced in Asian trading on Wednesday, driven by expectations that major producers will maintain current output cuts during a meeting on Sunday, and with the peak summer demand season set to boost fuel consumption.
Brent crude futures for July delivery increased by 18 cents, or 0.2%, reaching $84.40 a barrel by 0630 GMT. Similarly, U.S. West Texas Intermediate futures for July rose by 28 cents, or 0.3%, to $80.11 a barrel. Both benchmarks had gained more than 1% the previous day.
Traders and analysts anticipate that the Organization of the Petroleum Exporting Countries and its allies, including Russia (collectively known as OPEC+), will uphold voluntary production cuts totaling about 2.2 million barrels per day.
Sugandha Sachdeva, founder of the Delhi-based research firm SS WealthStreet, noted that the anticipation of OPEC+ extending their output cuts has injected optimism into the market, viewing the move as a concerted effort to stabilize prices and rebalance the global oil market.
Additionally, the start of the summer driving season in the U.S. typically leads to an increase in consumption, supporting a positive momentum in crude oil prices, Sachdeva added. The Memorial Day holiday on Monday marks the beginning of peak demand season in the U.S., the world’s largest oil consumer. Maintaining production cuts should help keep prices buoyant as consumption rises.
Daniel Hynes, senior commodity strategist at ANZ Bank, mentioned in a note that initial data suggest a relatively high number of U.S. holiday trips were taken over the Memorial Day holiday, indicating a strong start to the driving season. Air travel has also been robust.
Increased fighting in the Gaza Strip, as Israeli tanks advanced into the Rafah section, added to price support amid concerns of a broader conflict in the Middle East, a key oil supply region.
Investors are also monitoring U.S. crude inventory data from the American Petroleum Institute, which was delayed by a day due to the Memorial Day holiday. Preliminary data from a Reuters poll suggested that U.S. crude oil stockpiles likely fell by about 1.9 million barrels last week.
Additionally, market participants are awaiting U.S. inflation data this week, which could influence expectations for Federal Reserve interest rate decisions and impact oil prices. The U.S. core Personal Consumption Expenditures Price Index report for April, due on Friday, is expected to hold steady on a monthly basis. Policymakers remain cautious as data continues to reflect persistent inflation.
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