Oil prices rose on Wednesday on expectations that major producers will extend output cuts at a meeting on Sunday and that fuel consumption will start rising with the start of the peak summer demand season. Brent crude futures for July delivery added 74 cents, or 0.9 per cent, to $84.96 a barrel by 0917 GMT. US West Texas Intermediate futures for July climbed 69 cents, or 0.9 per cent, to $80.52. Both benchmarks gained more than 1 per cent on Tuesday.
OPEC+ Production Cuts
Traders and analysts expect the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, to keep voluntary production cuts of about 2.2 million barrels per day (bpd) in place.
“We see no appetite at this juncture to add more barrels to the market and trigger another price move to the downside,” said RBC Capital analyst Helima Croft. “The current price level is already causing several producers to take on additional debt and push out timelines for some high-profile projects.”
Summer Demand Surge
The onset of the northern hemisphere summer season, when demand for road and aviation fuels peaks, was also supporting prices.
“Initial data suggest a relatively high number of US holiday trips have been taken over the Memorial Day holiday, the traditional start of the driving season. Air travel has also been strong,” ANZ commodities strategist Daniel Hynes said in a note.
US Crude Inventory Data
Investors were awaiting US crude inventory data from the American Petroleum Institute later in the day. The release was pushed back by a day because of the Memorial Day holiday on Monday. US crude oil stockpiles are expected to have fallen by about 1.9 million barrels last week, a preliminary Reuters poll showed on Tuesday.
Investors are also awaiting US inflation data this week, which could sway expectations for interest rate cuts and affect oil prices. The US core Personal Consumption Expenditures Price Index report for April is due on Friday. The Fed’s preferred inflation barometer is expected to hold steady on a monthly basis. Expectations for the timing of rate cuts have see-sawed, with policymakers wary of sticky inflation.
Buzzard Oilfield Outage
Meanwhile, the Buzzard oilfield in the North Sea is experiencing a temporary production outage, a spokesperson for operator CNOOC said on Tuesday. Buzzard has capacity of 60,000 barrels of oil equivalent per day.
