NEW YORK: Global oil prices increased on Tuesday on the expectation that OPEC+ will maintain crude supply curbs at its June 2 meeting, while a weaker US dollar made the commodity more attractive to holders of other currencies.
The July contract for Brent crude, the global benchmark, rose 57 cents, or 0.7%, to $83.67 a barrel by 10:58 p.m. EDT (1458 GMT). US West Texas Intermediate (WTI) crude was at $79.36, up $1.64, or 2.1%, from Friday’s close, having traded through a US holiday to mark Memorial Day without a settlement.
Oil extended a more than 1% rise in trade on Monday that was muted due to the holiday, with hopes of a demand boost from the recent launch of the US summer driving and vacation season providing support. “This week’s upside follow through is being facilitated by a significant weakening in the dollar and a growing consensus that OPEC+ will extend production cuts at the upcoming weekend meeting,” said Jim Ritterbusch of Ritterbusch and Associates.
The dollar slipped 0.1% to a more than one-week low. Worries over US interest rates remaining elevated for a longer period contributed to a weekly loss for crude last week. Higher rates boost the cost of borrowing, which can dampen economic activity and demand for oil. Investors will watch the US core personal consumption expenditures price index (PCE), which is a main inflation gauge for the Federal Reserve, due on Friday.
“Despite the indisputably brighter mood seen in the last two days, interest rate concerns will most plausibly act as a (brake) on further attempts to send oil prices meaningfully higher in the immediate future,” said Tamas Varga of broker PVM.
The general view that high interest rates could result in softer oil demand growth, “real-time mobility data indicates oil demand growth is still broadly healthy,” UBS analyst Giovanni Staunovo wrote in a client note.
On the air travel front, US seat numbers on domestic flights for May rose by 5% month on month and almost 6% year on year to slightly above 90 million, data from flight analytics company OAG showed, surpassing 2019 levels.
Coming up is the online meeting of OPEC+ oil producers on Sunday, where traders and analysts are expecting 2.2 million barrels per day of voluntary production cuts to stay in place. “It is a fair assumption that no changes in production levels will be forthcoming,” PVM’s Varga said.
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