Oil Prices Rise: Demand, OPEC, US
Crude oil prices experienced a rise on Tuesday due to several factors driving optimistic sentiment. Projections of increased seasonal demand, supply cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+), and the US government’s plans to purchase oil for its strategic reserves all contributed to the price increase.
The international benchmark Brent crude traded at $76.33 per barrel, indicating a 0.44% rise from the previous trading session’s closing price of $75.99 per barrel. Similarly, the American benchmark West Texas Intermediate traded at $72.39 per barrel, reflecting a 0.47% increase from the previous session’s close of $72.05 per barrel.
Investor expectations of a seasonal boost in oil demand and the supply cuts implemented by the OPEC+ group primarily drove the price hike. The upcoming Memorial Day holiday on May 29, which traditionally marks the start of the summer driving season, is expected to further fuel demand in the country.
Concerns are arising regarding a potential weakening of oil supply in the second half of the year due to OPEC+’s decision to cut 1.2 million barrels per day, which came into effect in May.
Furthermore, the US government’s recent announcement of its intention to purchase up to 3 million barrels of crude oil for its strategic reserves, to be delivered in August, is supporting the upward trend in prices.
Analysts anticipate that the full implementation of OPEC+ production cuts, coupled with an additional increase in demand during the summer season, will lead to an oil supply deficit starting from June.
Asian countries are projected to drive most of the growth in oil demand, with an estimated consumption increase of approximately 2 million barrels per day in the latter half of the year. However, concerns surrounding the US debt limit crisis are hampering the upward movement of prices.
Additionally, James Bullard, the President of the US Federal Reserve Bank of St. Louis, has suggested that the Fed may need to raise the policy rate by 50 basis points within the current year.
