Il oil price is up this morning, settling near the two-month highs reached in the previous session.
The jump was driven by the forecast of a growing demand for fuel during the summer tourist season and from the expectations of possible interest rate cuts in the United States that could stimulate economic growth.
Furthermore, the tensions in the Middle East and concerns about the rapid start of the Atlantic hurricane season — which could destroy or shut down U.S. plants — have spurred prices to rise.
Just before the opening of the European stock markets, Brent is trading above $86 a barrel and WTI futures are above $86 a barrel. Oil prices look set to risewhat’s happening today and what’s the forecast for black gold?
Why is oil price rising to two-month highs?
Oil is consolidating the earnings last month. There are several factors to consider to explain this progress.
L’OPEC+ keeps supply in check and travel picks up in the Northern Hemisphere summer, with traders likely to keep an eye on the gasoline demand in the US with the US Independence Day on Thursday. Meanwhile, concerns over the faltering recovery in Chinathe world’s largest crude oil importer, will likely limit price increases.
Markets are also expecting possible disruptions in US refining due to theHurricane Beryl. Forecasts show the storm moving toward the Bay of Campeche in Mexico, causing problems for local oil production.
On the macroeconomic front, signs of declining inflation in the United States are renewing hopes that the Federal Reserve may cut interest rates, probably in September.
A report released on Monday showed that US manufacturing activity contracted for a third month and that prices paid by producers for some inputs fell to their lowest level in six months.
Coupled with Friday’s Commerce Department report showing U.S. inflation data remained unchanged in May, this could bolster the case for the lowering of interest rates Americans, a move that would boost economic activity and thus the oil demand.
Finally, the Middle East picture is still under observation, with a conflict that continues and threatens to spread in the region. The Israeli military said that 18 soldiers were injured in a drone strike by Iranian-backed Hezbollah, one of them seriously, threatening to bring the conflict closer to a large-scale war. An escalation with Iranian participation could involve the oil productionrestringendola.
What to expect in crude oil prices?
The trend of oil prices “it seems to be driven more from fear and from the sentiment that from the fundamentals”said Vandana Hari, founder of Vanda Insights, a provider of oil market analytics. She cited the summer fuel demand outlook, the increased likelihood of conflict between Israel and Iran, and Hurricane Beryl as supporting factors.
“The break of the recent interval towards a new highest high strengthens the short-term uptrend” suggested Yeap Jun Rong, market strategist at IG Asia Pte. That could leave buyers waiting for a retest of the April 2024 high at the key level of $90 per Brent.
ING commodity experts wrote in a note that they continue to maintain a supportive view towards Brent, although there are concerns about demand.
