Tuesday, July 16, 2024
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Oil prices rise on hopes of summer fuel demand

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Oil prices rose on Monday on hopes of higher fuel demand this summer, but gains were capped by a stronger dollar on fading expectations of a U.S. interest rate cut.

Strong shipping demand over the summer will push the crude oil market into a supply deficit of 1.3 million barrels per day in the third quarter, Goldman Sachs analysts said in a report, and they expect Brent crude to rise to $86 a barrel in the third quarter.

Brent crude futures were up 53 cents, or 0.7%, at $80.15 a barrel as of 1:20 p.m., while West Texas Intermediate crude futures were up 57 cents, or 0.8%, at $76.10.

“The price rise started as the US woke up and a new week began. Investors on the other side of the Atlantic are clearly ignoring the weakening of the euro and the resulting strengthening of the dollar due to the early French elections,” said Tamas Varga at oil broker PVM.

“As the summer driving season approaches, we are increasingly confident that demand will pick up and inventory draws will be material.” Oil fell for a third straight week last week, driven by concerns that plans by the Organization of the Petroleum Exporting Countries (OPEC) and its allies (collectively known as OPEC+) to partially lift production cuts from October will spur supply growth. Oil inventories are rising despite the OPEC+ production cuts. U.S. crude oil inventories rose in the most recent week, as did gasoline inventories. Energy consultancy FGE also expects prices to reach the mid-$80s through the third quarter. “We expect the market to remain firm,” FGE said. “However, we would need to see compelling signals of tightening from preliminary inventory data.”

A strong dollar weighed on the market but rose after investors lowered their interest rate outlook following Friday’s U.S. jobs report. [USD/]

Meanwhile, the euro fell after French President Emmanuel Macron called early parliamentary elections.

A stronger US dollar makes dollar-denominated goods, such as oil, more expensive for holders of other currencies.

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