By Oil prices increased in Asian trading on Wednesday, driven by expectations that major producers will keep their output cuts in place during a meeting this Sunday. Additionally, fuel consumption is anticipated to rise with the onset of the peak summer demand season.
Brent crude futures for July delivery rose by 15 cents, or 0.2%, to $84.37 a barrel by 0304 GMT. U.S. West Texas Intermediate futures for July climbed 25 cents, or 0.3%, to $80.08. Both benchmarks had gained more than 1% the previous day.
OPEC+ Output Cuts
Traders and analysts predict that the Organization of the Petroleum Exporting Countries and its allies, including Russia (known as OPEC+), will continue with voluntary production cuts totaling about 2.2 million barrels per day.
“The anticipation of OPEC+ members extending their output cuts has injected optimism into the markets. This move is seen as a concerted effort to stabilize prices and rebalance the global oil market,” said Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet.
Seasonal Demand Increase
“The onset of the summer driving season in the U.S. spurs a seasonal uptick in consumption and typically aids a positive momentum in crude oil prices,” Sachdeva added.
The Memorial Day holiday on Monday marks the start of the peak demand season in the U.S., the world’s largest oil consumer. Keeping the production cuts in place should support prices as consumption rises.
Daniel Hynes, senior commodity strategist at ANZ Bank, noted in a report, “Initial data suggest a relatively high number of U.S. holiday trips have been taken over the Memorial Day holiday, the traditional start of the driving season. Air travel has also been strong.”
Geopolitical Tensions
Increased fighting in the Gaza Strip, as Israeli tanks advanced into the heart of the Rafah section, also provided some support for prices amid concerns of the conflict widening in the Middle East, a key supply region.
U.S. Crude Inventory Data
Investors are also monitoring U.S. crude inventory data from the American Petroleum Institute, set to be released later in the day. The data release was delayed by a day due to the Memorial Day holiday on Monday.
A preliminary Reuters poll on Tuesday indicated that U.S. crude oil stockpiles were expected to have fallen by about 1.9 million barrels last week.
Inflation and Federal Reserve Decisions
Investors are also 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 is due on Friday and is expected to remain steady on a monthly basis.
Expectations for the timing of rate cuts have fluctuated, with policymakers remaining cautious as data continues to show persistent inflation.
