Oil prices climbed on Monday, bolstered by forecasts of a supply deficit due to peak summer fuel consumption and OPEC+ cuts in the third quarter. Despite this, global economic headwinds and rising non-OPEC+ output limited the gains. Brent crude futures increased by 53 cents, or 0.6%, reaching $85.53 a barrel by 0729 GMT, while U.S. West Texas Intermediate crude futures were up by 51 cents, or 0.6%, to $82.05 a barrel. Both contracts saw a roughly 6% increase in June, with Brent consistently settling above $85 a barrel in the past two weeks. This was after the Organisation of the Petroleum Exporting Countries (OPEC) and their allies, known as OPEC+, extended most of their deep oil output cuts well into 2025. Analysts predict supply deficits in the third quarter as summer’s transportation and air-conditioning demands deplete fuel stockpiles.
On Friday, the Energy Information Administration (EIA) reported that oil production and demand for major products rose to a four-month high in April, supporting prices. ING analysts, led by Warren Patterson, noted a supportive view towards Brent despite concerns around U.S. gasoline demand and Chinese apparent demand. Factory activity among smaller Chinese manufacturers grew at the fastest pace since 2021 due to overseas orders, according to a private index. However, a broader survey indicated weak domestic demand and trade frictions, resulting in another industrial sector contraction. China remains the world’s second-largest consumer and top crude importer.
Hopes of a U.S. Federal Reserve interest rate cut and rising geopolitical concerns in Europe, as well as tensions between Israel and Lebanon’s Hezbollah, have also supported prices, according to IG analyst Tony Sycamore. He noted that WTI’s recent rally could extend towards $85 a barrel if prices stay above the 200-day moving average of $79.52. Traders are also monitoring the impact of hurricanes on oil and gas production and consumption in the Americas. The Atlantic hurricane season began with Hurricane Beryl on Sunday. Beryl, the earliest Category 4 hurricane on record, headed toward the Caribbean’s Windward Islands, expected to bring life-threatening winds and flash flooding on Monday, as reported by the U.S. National Hurricane Center.
Oil prices have seen support from various factors including OPEC+ cuts, summer fuel consumption, and geopolitical concerns. However, global economic challenges and increased non-OPEC+ production have tempered gains. As the hurricane season begins, the impact on oil and gas production in the Americas will be closely monitored.
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.
