The Rising Price of Oil: Factors Behind the Increase
The Price of Oil is Expected to Rise
The price of oil is set to rise for the second week in a row, driven by signs of improving demand and a decrease in oil and fuel inventories in the United States, the world’s largest oil consumer.
Current Oil Prices
WTI futures are trading above $81 per barrel, while Brent crude is slightly down at $85.70 per barrel.
Prices have increased by about 5% since the beginning of the month, reaching the highest level in over seven weeks.
Reasons for the Expected Price Increase
Oil is heading towards the first consecutive weekly gain since early April, as the surprising drop in inventory levels in the United States, along with signs of strong demand for petroleum products, have signaled favorable conditions for the world’s leading consumer.
Other bullish signs include a forecast by the American Automobile Association that a record number of 71 million Americans will travel during the 4th of July holiday period in the United States.
Overall, the data from the EIA suggests a contraction in the US oil market,” said Vivek Dhar, an analyst at the Commonwealth Bank of Australia, referring to the Energy Information Administration.
However, “in the short term, we believe that disappointing Chinese oil demand growth is the main downside risk to consider,” he said.
“The seasonal increase in demand, as shown by the latest EIA data, the renewed confrontation between Israel and Hezbollah, and the hurricane season could support price strength through the summer,” said Citi analysts in a note.
“Signals of stronger demand in Asia have also bolstered sentiment.
Oil refineries across the region are restoring some of the idle capacity after maintenance,” according to ANZ Research experts.
Crude oil has risen this month, rebounding sharply after OPEC+ outlined a plan to bring some barrels back to the market.
Banks, including Goldman Sachs Group Inc., have said they expect global oil consumption to outstrip supply, reducing inventories and supporting prices.
