Oil Prices Teeter at Two-Month High

2 Jul 2024 , 11:26 AM

Oil prices were little changed on Tuesday, remaining near the two-month highs attained the previous session, on forecasts of growing fuel consumption from the summer vacation season and potential US interest rate cuts to support economic growth.

Brent crude futures increased 20 cents to $86.80 per barrel, following a 1.9% advance in the previous session to their highest closing since April 30.

U.S. West Texas Intermediate (WTI) crude increased 13 cents to $83.51 per barrel, after rising 2.3% to its highest level since April 26.

Petrol demand in the United States, the world’s largest oil consumer, is likely to increase as the summer travel season begins with the Independence Day vacation this week. The American Automobile Association predicts that travel during the holiday season will be 5.2% higher than in 2023, with car travel alone up 4.8% from the previous year.

On the supply side, markets were bracing for potential interruptions in US oil refining and offshore output due to Hurricane Beryl. However, current estimates indicate that the storm will likely move towards Mexico’s Bay of Campeche, posing challenges for oil production there.

Beryl made landfall in the Caribbean as a category 4 storm on Monday, prompting the US National Hurricane Centre to issue a “extremely dangerous situation” after jumping from a category 1 storm in less than 10 hours.

Signs of receding inflation in the United States are fueling hopes that the Federal Reserve would drop interest rates, potentially in September.

According to a study released on Monday, U.S. manufacturing activity decreased for the third consecutive month, and prices paid by manufacturers for several inputs fell to their lowest level in six months.

Along with a Commerce Department report on Friday showing that U.S. inflation figures remained constant in May, this could enhance the case for lowering US interest rates, which would boost economic activity and energy demand.

Nonetheless, indicators of slower-than-expected demand growth have restricted advances in oil prices.

According to some estimates, crude imports to Asia, the world’s largest oil-consuming region, were lower in the first half of 2024 than the previous year. This was primarily due to decreasing imports to China, the world’s largest oil importer and second-largest consumer.

For feedback and suggestions, write to us at [e-mail]