OIL prices rose on Monday, as signs of improving demand in the US and China, the top two oil consumers, aided the bounce from the previous session’s US$1 a barrel slide.
US West Texas Intermediate crude futures rose 86 cents, or 1.1 per cent, to settle at US$79.12 a barrel. Brent crude futures gained 57 cents, or 0.7 per cent, to settle at US$83.36 a barrel.
Prices drew support from expectations of strong US petrol demand, as motorist group AAA forecast this year’s Memorial Day travel activity will be the highest since 2005, with road trips at a record since 2000.
US crude oil stockpiles likely declined last week, according to a preliminary Reuters poll of analysts. Declining stocks are typically a sign of improving demand.
Chinese data at the weekend showed consumer prices rising for a third straight month in April while producer prices extended declines, signalling improved domestic demand. The country also plans to raise 1 trillion yuan (S$187.1 billion) for economic stimulus.
On the supply front, investors are watching for potential oil supply disruptions in Western Canada due to wildfires the country’s government has warned could be “catastrophic”.
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“Canadian oil sands production currently has a 3.3 million barrel daily capacity, which is very likely to be affected moving into the summer,” said Alex Hodes, analyst at energy brokerage StoneX.
Oil prices have also found support from enduring expectations that Opec+, the Organization of the Petroleum Exporting Countries and its allies, will extend supply cuts into the second half.
No. 2 Opec producer Iraq is committed to oil production cuts agreed by the group, its oil minister told the state news agency on Sunday. Those comments followed his suggestion on Saturday that Iraq would not agree to any additional cuts proposed by the wider group at its meeting on June 1.
Traders said they are more cautious about the Middle East as hopes have been dashed for a ceasefire in Gaza. Israel on Sunday pushed back into North Gaza, while the death toll in Israel’s military operation has passed 35,000 Palestinians, according to Gaza’s health ministry.
Investors will watch the US Consumer Price Index data due on Wednesday for clues to when the Federal Reserve will consider cutting interest rates, Hodes said.
Analysts expect the US central bank to keep its policy rate on hold for longer, supporting the dollar and making dollar-denominated oil more expensive for buyers holding other currencies. REUTERS
