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Tokyo — Oil prices continued to climb on Tuesday with investors expecting a tighter market led by a seasonal rise in fuel demand and supply cuts from oil cartel Opec+ producers, though concerns over the risk of a US debt default capped gains.
Brent crude futures rose 28c, or 0.37%, to $76.27 a barrel by 3.20am GMT, while US West Texas Intermediate (WTI) crude was at $72.36 a barrel, up 31c, or 0.43%.
It was the second day of gains after Brent rose 0.5% on Monday. WTI gained 0.6%, amid a 2.8% increase in US petrol futures ahead of the Memorial Day holiday on May 29 that traditionally marks the start of the peak summer fuel demand season.
“Oil prices are consolidating their bottoms, helped by a seasonal increase in US gasoline demand from next week, production cuts by Opec+ from this month and planned US purchases to refill the strategic petroleum reserve,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
Last week, the US department of energy said it would buy 3-million barrels of crude oil to replenish the strategic petroleum reserve for delivery in August.
Voluntary production cuts by Opec+ that went into effect this month are also expected to keep oil markets tight.
Goldman Sachs analysts said in a report on Monday that it “expects sustained (oil supply) deficits from June as Opec+ production cuts fully realise and demand rises further”.
Asia would lead much of that oil demand growth, adding about 2-million barrels per day of consumption in the second half of the year, a Vitol executive said on Monday.
Still, investors are also focused on negotiations to raise the debt limit of the US, the world’s biggest oil consumer. A US default is likely to spark chaos in financial markets and a spike in interest rates, affecting fuel demand growth both domestically and globally.
President Joe Biden and House speaker Kevin McCarthy ended discussions on Monday with no agreement on how to raise the US government’s $31.4-trillion debt ceiling and will keep talking with just 10 days before a possible default.
“The central focus for the broader risk environment has been revolving on the US debt-ceiling talks, and while that is keeping a cautious lid on upside for now, a positive up move on any eventual resolution on that front may remain on the table,” said Jun Rong Yeap, a market strategist at IG in Singapore.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil extends gains on higher US fuel demand
Tokyo — Oil prices continued to climb on Tuesday with investors expecting a tighter market led by a seasonal rise in fuel demand and supply cuts from oil cartel Opec+ producers, though concerns over the risk of a US debt default capped gains.
Brent crude futures rose 28c, or 0.37%, to $76.27 a barrel by 3.20am GMT, while US West Texas Intermediate (WTI) crude was at $72.36 a barrel, up 31c, or 0.43%.
It was the second day of gains after Brent rose 0.5% on Monday. WTI gained 0.6%, amid a 2.8% increase in US petrol futures ahead of the Memorial Day holiday on May 29 that traditionally marks the start of the peak summer fuel demand season.
“Oil prices are consolidating their bottoms, helped by a seasonal increase in US gasoline demand from next week, production cuts by Opec+ from this month and planned US purchases to refill the strategic petroleum reserve,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
Last week, the US department of energy said it would buy 3-million barrels of crude oil to replenish the strategic petroleum reserve for delivery in August.
Voluntary production cuts by Opec+ that went into effect this month are also expected to keep oil markets tight.
Goldman Sachs analysts said in a report on Monday that it “expects sustained (oil supply) deficits from June as Opec+ production cuts fully realise and demand rises further”.
Asia would lead much of that oil demand growth, adding about 2-million barrels per day of consumption in the second half of the year, a Vitol executive said on Monday.
Still, investors are also focused on negotiations to raise the debt limit of the US, the world’s biggest oil consumer. A US default is likely to spark chaos in financial markets and a spike in interest rates, affecting fuel demand growth both domestically and globally.
President Joe Biden and House speaker Kevin McCarthy ended discussions on Monday with no agreement on how to raise the US government’s $31.4-trillion debt ceiling and will keep talking with just 10 days before a possible default.
“The central focus for the broader risk environment has been revolving on the US debt-ceiling talks, and while that is keeping a cautious lid on upside for now, a positive up move on any eventual resolution on that front may remain on the table,” said Jun Rong Yeap, a market strategist at IG in Singapore.
Reuters
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