Oil prices steady amid summer demand hopes, supply risks
2024.07.01 21:44
Investing.com– Oil prices steadied in Asian trade on Tuesday after running up sharply in recent sessions as traders bet on increased demand during the Independence Day holiday and potential supply risks from geopolitics and weather-related disruptions.
Crude markets largely rose past jitters over mixed economic data from China and signs that U.S. fuel demand had not picked up as strongly as markets were hoping. Resilience in the dollar, ahead of more signals on interest rates this week, also did little to deter crude’s rally.
expiring in September rose 0.2% to $86.78 a barrel, while rose 0.2% to $82.48 a barrel by 21:01 ET (01:01 GMT).
Independence day week to see increased travel
Crude’s recent run-up was largely driven by hopes that fuel demand in the U.S. will pick up with the onset of the travel-heavy summer season.
The American Automobile Association forecast that a record number of people will travel by car during the current week, on account of the Independence Day holiday.
“We anticipate this July 4th week will be the busiest ever with an additional 5.7 million people traveling compared to 2019,” the AAA said in a recent statement.
Increased travel during the summer season bodes well for fuel demand, although a recent, sustained increase in U.S. fuel inventories raised questions about just how much of this trend was in play.
Middle East, hurricane supply risks abound
A major point of support for crude in recent sessions was increased concerns over an all-out war in the Middle East, as tensions between Israel and Hezbollah, over Gaza, showed little signs of easing.
Traders attached a higher risk premium to crude over the conflict, betting that supplies from the Middle East will be disrupted by a bigger war. Continued clashes between Russia and Ukraine, with the latter targeting Moscow’s oil infrastructure, also factored into crude’s risk premium.
Additionally, potential supply disruptions due to hurricane Beryl in the U.S. also presented the prospect of tighter crude markets. Beryl was seen making its way towards Mexico and could potentially disrupt offshore oil production along its path.
The prospect of tighter supplies also comes as the Organization of Petroleum Exporting Countries maintained its current course of production cuts, which analysts expect will substantially tighten crude markets in the remainder of 2024.
