Oil Prices Rise on Supply Deficit Forecasts and OPEC+ Cuts

Oil prices climbed on Monday, bolstered by projections of a supply deficit attributed to peak summer fuel consumption and ongoing cuts by OPEC+ in the third quarter.

Brent crude futures increased by 53 cents to $85.53 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 51 cents to $82.05 a barrel.

June Performance:

Both Brent and WTI contracts saw gains of approximately 6% in June, with Brent settling above $85 a barrel in recent weeks.

This follows OPEC+ extending deep oil output cuts into 2025, prompting analysts to anticipate supply shortfalls during the third quarter due to heightened demand from transportation and air-conditioning sectors.

The Energy Information Administration (EIA) reported that oil production and demand for major products reached a four-month high in April, providing additional support to prices.

Analyst Insights:

According to analysts from ING, while there are concerns about demand, such as U.S. gasoline demand and Chinese apparent demand, they maintain a supportive outlook for Brent.

China’s manufacturing activity among smaller firms expanded significantly due to overseas orders, contrasting with weaker domestic demand and trade tensions, affecting its status as a top crude importer.

Geopolitical factors, including expectations of a U.S. Federal Reserve interest rate cut and tensions in Europe and the Middle East, continue to influence market stability.

Technical Outlook:

WTI’s recent rally suggests a potential extension towards $85 a barrel if prices maintain above the 200-day moving average at $79.52.

Traders are monitoring the Atlantic hurricane season, beginning with Hurricane Beryl, which poses risks to oil and gas production and consumption in the Americas with its forecasted impact on the Caribbean’s Windward Islands.