Oil prices rose in Asian trading on Wednesday on expectations major producers will maintain output cuts at a meeting this Sunday, and that fuel consumption should begin rising with the start of the peak summer demand season.
Brent crude futures for July delivery added 15 cents, or 0.2%, to $84.37 a barrel by 0304 GMT. U.S. West Texas Intermediate futures for July climbed 25 cents, or 0.3%, to $80.08. Both benchmarks gained more than 1% a day earlier.
Traders and analysts expect the Organization of the Petroleum Exporting Countries and its allies including Russia, known as OPEC+, to keep voluntary production cuts totalling about 2.2 million barrels per day in place.
The anticipation of OPEC+ members extending their output cuts has injected optimism into the markets and the move will be seen as a concerted effort to stabilise prices and rebalance the global oil market, said Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet.
“Furthermore, the onset of the summer driving season in the U.S. spurs a seasonal uptick in consumption and typically aids a positive momentum in crude oil prices,” she added.
The Memorial Day holiday on Monday signals the start of the peak demand season in the U.S., the world’s biggest oil consumer, and keeping the production cuts in place should keep prices supported as consumption rises.
“Initial data suggest a relatively high number of U.S. holiday trips have been taken over the Memorial Day holiday, the traditional start of the driving season. Air travel has also been strong,” Daniel Hynes, senior commodity strategist at ANZ Bank, said in a note.
Increased fighting in the Gaza Strip as Israeli tanks advanced to the heart of the Rafah section also provided some backing for prices amid concerns of a widening of the conflict to the greater Middle East, a key supply region.
Investors were also watching out for U.S. crude inventory data from the American Petroleum Institute being released later in the day. The data was delayed by a day due to the Memorial Day holiday on Monday.
U.S. crude oil stockpiles were expected to have fallen by about 1.9 million barrels last week, a preliminary Reuters poll showed on Tuesday.
Investors also awaited U.S. inflation data this week that could sway expectations for Federal Reserve interest rate cuts and impact oil prices.
The U.S. 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 as data still reflects sticky inflation.
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