Oil prices rose in Asian trading on Wednesday, with expectations that major oil producers would maintain production cuts at a meeting this Sunday. Additionally, with the onset of the peak summer demand season, fuel consumption is expected to begin rising.
As of 0304 GMT, Brent crude futures for July delivery rose 15 cents, or 0.2%, to $84.37 per barrel. July U.S. West Texas Intermediate (WTI) crude futures increased by 25 cents, or 0.3%, to $80.08 per barrel. Both benchmarks rose over 1% in the previous day.
Traders and analysts expect the Organization of the Petroleum Exporting Countries and its allies (OPEC+), including Russia, to continue implementing voluntary production cuts of about 2.2 million barrels per day.
Sugandha Sachdeva, founder of Delhi research firm SS WealthStreet, stated that the anticipated extension of production cuts by OPEC+ members is expected to inject optimism into the market. This move will be seen as a collective effort to stabilize oil prices and rebalance the global oil market.
She added, "Furthermore, the beginning of the U.S. summer driving season typically leads to seasonal increases in consumption, which usually bolsters positive momentum for crude oil prices."
Memorial Day on Monday marked the commencement of the peak demand season in the U.S., and maintaining production cuts amidst rising consumption will help sustain price support.
In a statement, Daniel Hynes, Senior Commodity Strategist at ANZ Bank, said, "Preliminary data shows relatively high holiday travel numbers in the U.S. during the Memorial Day holiday, marking the traditional start of the driving season. Air travel is also very busy."
The advance of Israeli tanks into the center of the Rafah area has escalated the conflict in the Gaza Strip, raising concerns of a broader conflict in the Middle East, a crucial supply region, which has provided some support for oil prices.
Investors are also monitoring the U.S. crude inventory data released by the American Petroleum Institute, which has been delayed by a day due to the Memorial Day holiday.
A preliminary Reuters poll on Tuesday showed that U.S. crude inventories are expected to have fallen by about 1.9 million barrels last week.
Investors are also waiting for U.S. inflation data this week, which could influence the Federal Reserve's interest rate decisions and, consequently, oil prices.
The report on the U.S. core Personal Consumption Expenditures (PCE) price index for April will be released on Friday. The Fed's preferred inflation gauge is expected to remain steady on a monthly basis.
Expectations around the timing of interest rate adjustments have been fluctuating, with policymakers still seeing sustained inflation issues in the data.
