Oil prices rose in Asian trading on Wednesday, driven by expectations that major producers will maintain output cuts at a meeting this Sunday. Additionally, the start of the peak summer demand season is anticipated to boost fuel consumption.
By 0630 GMT, Brent crude futures for July delivery had increased by 18 cents, or 0.2%, reaching $84.40 a barrel. Similarly, U.S. West Texas Intermediate futures for July had climbed 28 cents, or 0.3%, to $80.11. Both benchmarks had gained over 1% the previous day.
Traders and analysts predict that the Organization of the Petroleum Exporting Countries and its allies, including Russia (collectively known as OPEC+), will maintain voluntary production cuts amounting to approximately 2.2 million barrels per day.
Sugandha Sachdeva, founder of the Delhi-based research firm SS WealthStreet, stated that the anticipation of OPEC+ extending their output cuts has injected optimism into the markets. This move is seen as a concerted effort to stabilise prices and rebalance the global oil market.
“Furthermore, 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,” she 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, and maintaining the production cuts should support prices as consumption rises.
Daniel Hynes, senior commodity strategist at ANZ Bank, noted in a statement that initial data suggests a relatively high number of U.S. holiday trips were taken over the Memorial Day holiday, which traditionally signals the start of the driving season. He also highlighted strong air travel.
The prices received further support from increased fighting in the Gaza Strip, where Israeli tanks advanced to the heart of the Rafah section. This escalation raised concerns about a potential widening of the conflict to the greater Middle East, a crucial supply region.
Investors are also closely watching for U.S. crude inventory data from the American Petroleum Institute, which is expected to be released later in the day. The data was delayed by a day due to the Memorial Day holiday.
Union Jack Oil plc (LON:UJO) is an onshore oil and gas exploration company with a focus on drilling, development and investment opportunities in the United Kingdom hydrocarbon sector.
