Oil prices up on supply cut expectation

29 May 2024 , 09:49 AM

At a conference this Sunday, major producers are expected to maintain their output restrictions, which would likely lead to higher fuel prices as the peak summer demand season approaches. This expectation drove up oil prices on Wednesday. July delivery of Brent crude futures increased by 27 cents, or 0.3%, to $84.49 a barrel. The July contract for U.S. West Texas Intermediate increased by 35 cents, or 0.4%, to $80.18.

Analysts and traders anticipate that OPEC+, or the Organisation of the Petroleum Exporting Countries, and its allies, which includes Russia, will continue to implement voluntary production cuts amounting to roughly 2.2 million barrels per day.

While the world’s largest oil consumer, the United States, enters its peak demand season on Monday with the Memorial Day vacation. If production cuts are maintained, prices should remain supported while consumption increases.

A little support for prices was also given by the escalation of violence in the Gaza Strip as Israeli tanks moved closer to the centre of the Rafah district, raising fears that the conflict will spread to the larger Middle East, a vital supply corridor.

Investors were also waiting for the American Petroleum Institute to disclose statistics on U.S. crude inventories later in the day. Monday’s Memorial Day holiday caused a day-long delay in the data.

According to a preliminary Reuters poll released on Tuesday, there was an estimated 1.9 million fewer barrels of crude oil in U.S. stocks last week.

This week, investors were also watching U.S. inflation statistics that could alter expectations for interest rate cuts by the Federal Reserve, which could be good news for oil prices.

Rate-cut expectations have fluctuated, and officials are still cautious because the data continues to show persistent inflation.

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