NEW YORK: Oil prices edged up on Monday on the prospect of strong summer fuel demand and rising geopolitical tensions outweighed the effects of a stronger dollar. Brent futures for August delivery were up 53 cents to $85.77 a barrel, a 0.6% gain, by 11:38 a.m. EST (or 1538 GMT).
US crude futures rose 65 cents to $81.38 per barrel, or a 0.8% gain. Both benchmarks advanced about 3% last week for their second consecutive weekly upswing.
“The chief underlying reason behind the price strength ... is the growing confidence that global oil inventories will inevitably plunge during the summer in the northern hemisphere,” said Tamas Varga of oil broker PVM, referring to seasonal demand for oil products. After last week’s big decline in US crude and gasoline inventories,, traders are watching whether the report due on Wednesday provides more signals of sustained strong gasoline demand, said Bob Yawger, director of energy futures at Mizuho in New York.
“It has to sustain for this positive narrative to continue in the market,” said Yawger, adding that the growing electric vehicle market is increasingly eating into gasoline’s share of the transportation market. Geopolitical risks in the Middle East and a ramp-up in Ukrainian drone attacks on Russian refineries are also underpinning oil prices.
EU countries on Monday agreed on a new package of sanctions against Russia over its war in Ukraine, including a ban on reloading Russian liquefied natural gas (LNG) in the EU for further shipment to third countries. However, a strengthening US currency has made dollar-denominated commodities more expensive for buyers using other currencies.
“The US dollar ... appears to have broken higher following better US PMI data on Friday night and political concerns ahead of the French election,” said IG analyst Tony Sycamore. The dollar index, measuring performance against six major currencies, climbed on Friday and was up slightly on Monday after data showed US business activity at a 26-month high in June.
In Ecuador, state oil company Petroecuador has declared force majeure on deliveries of Napo heavy crude for export after the shutdown of a key pipeline and oil wells owing to heavy rain, sources said on Friday.