Oil is trading near a two-month high on an outlook for summer demand, which could be downgraded by Reuters
By Mohi Narayan and Colleen Howe
BEIJING (Reuters) – Oil prices were little changed on Tuesday, holding close to a two-month high reached in the previous session, on expectations of a pick-up in fuel demand from the summer travel season and a U.S. interest rate cut that could boost economic growth.
futures rose 20 cents to $86.80 a barrel as of 0313 GMT after gaining 1.9% in the previous session to their highest close since April 30.
US West Texas Intermediate (WTI) crude rose 15 cents to $83.53 a barrel, after gaining 2.3% to its highest since April 26.
The movement of oil prices “seems to be a lot of fear and sentiment driven more than fundamentals,” said Vandana Hari, founder of oil market analysis provider Vanda (NASDAQ:) Insight, which points to the perception of fuel demand in the summer, a high chance of conflict between Israel. and Iran and Hurricane Beryl as supporting factors.
Gasoline demand in the US, the world’s largest oil consumer, is expected to increase as the summer tourist season kicks off with the Independence Day holiday this week. The American Automobile Association has predicted that travel during the holidays will be 5.2% higher than in 2023, and travel by car alone will be 4.8% higher than last year.
“This could help fuel demand recover after the first half of 2024,” ANZ analysts wrote in a note.
On the supply side, markets were bracing for possible disruptions from Hurricane Beryl to US oil refining and onshore production. However, forecasts currently indicate that the storm is likely to move into Mexico’s Bay of Campeche and cause problems with oil production there.
Beryl hit the Caribbean as a Category 4 storm on Monday with warnings from the US National Hurricane Center of “high risk” after it went down from a Category 1 storm within 10 hours.
Signs of lower US inflation are reviving hopes that the Federal Reserve may cut interest rates, possibly in September.
Monday’s report showed US manufacturing contracted for a third month, and prices producers paid for certain inputs fell to the lowest level in six months.
Along with the Commerce Department’s report on Friday showing US inflation data was unchanged in May, that could strengthen the case for reducing US interest rates, a move that will boost economic activity and oil demand.
Still, signs of lower-than-expected demand growth have limited benefits for oil prices.
Some data show that imports from Asia, the world’s largest oil-consuming region, in the first half of 2024, were lower than last year. This was due to a drop in oil imports from China, the world’s largest oil importer and second largest consumer.
