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Oil Prices Experience Modest Gains in Response to Supply Deficits and Economic Conditions
Oil prices saw a modest uptick in early Monday trading, driven primarily by anticipations of a supply deficit due to peak summer fuel consumption and strategic output cuts by OPEC+. Despite these gains, broader global economic challenges and increasing non-OPEC+ oil production have tempered the price rise.
Brent crude futures increased by 16 cents, or 0.2%, reaching $85.16 per barrel as of 0032 GMT. Concurrently, U.S. West Texas Intermediate (WTI) crude futures also climbed 17 cents, or 0.2%, to $81.71 per barrel. Notably, both benchmarks achieved approximately a 6% rise in June, with Brent consistently settling above the $85 mark over the past two weeks. This trend followed OPEC+’s decision to extend significant oil output cuts through to 2025. These cuts have led analysts to predict supply shortages in the third quarter, as heightened summer demand for transportation and air conditioning depletes fuel reserves.
Additionally, optimism surrounding possible interest rate cuts by the U.S. Federal Reserve and escalating geopolitical tensions in Europe and the Middle East, particularly between Israel and Lebanon’s Hezbollah, have provided further support to oil prices. IG analyst Tony Sycamore indicated that WTI’s recent rally could potentially rise toward $85 per barrel, provided prices remain above the 200-day moving average at $79.52.
U.S. Oil Production and Hurricane Impact
In the United States, oil production and demand reached a four-month peak in April, as reported by the Energy Information Administration’s (EIA) Petroleum Supply Monthly. Market participants are also keeping a close watch on the potential impact of hurricanes on oil and gas production and consumption in the Americas. The Atlantic hurricane season has commenced, with Hurricane Beryl already forming. According to the U.S. National Hurricane Center, Beryl, the earliest Category 4 hurricane on record, is projected to affect the Caribbean’s Windward Islands with severe winds and flash flooding.
China's Manufacturing Woes
On the global front, concerns about oil demand have been exacerbated by recent manufacturing data from China. The world’s second-largest oil consumer and top crude importer has seen its manufacturing activity decline for a second consecutive month in June, while services activity dipped to a five-month low, according to an official survey released on Sunday. This downturn has fueled further calls for economic stimulus as China continues to grapple with efforts to revive its economy.
