Oil Prices Surge: Further Increase Expected

Oil Prices Surge on Strong Demand and Economic Stimulus

This morning, the price of oil is on the rise, hovering near the two-month highs reached in the previous session.
The surge is driven by expectations of increased fuel demand during the summer tourist season and the possibility of interest rate cuts in the United States to boost economic growth.

Additionally, tensions in the Middle East and concerns about the early start of the hurricane season in the Atlantic, which could disrupt or halt US facilities, have also contributed to the price increase.

Factors Driving the Oil Price Surge

The oil market is consolidating gains from the previous month, with several factors contributing to this upward momentum.

The OPEC+ alliance is effectively managing the oil supply, while travel is picking up in the Northern Hemisphere summer.
Traders are closely monitoring gasoline demand in the US ahead of the Independence Day holiday on Thursday.

However, worries about a faltering recovery in China, the largest crude oil importer, are likely to cap price increases.
Concerns also loom over potential disruptions to US refining due to Hurricane Beryl.

Macroeconomic Factors and Price Outlook

Signs of decreasing inflation in the US have raised hopes that the Federal Reserve may cut interest rates, possibly in September.
Recent reports indicating a contraction in US manufacturing activity and lower producer prices further support the case for a rate cut to stimulate economic activity and oil demand.

Furthermore, ongoing conflicts and the possibility of escalation in the Middle East pose a constant threat to oil production in the region, adding to price uncertainties.

Expert Insights and Price Expectations

Vandana Hari, founder of Vanda Insights, noted that the oil price trend seems to be driven more by fear and sentiment than fundamentals.
Factors such as summer fuel demand, geopolitical tensions between Israel and Iran, and Hurricane Beryl are providing support.

Strategist Yeap Jun Rong from IG Asia Pte suggested that the recent breakout to new highs reinforces the short-term bullish trend, with buyers eyeing a retest of the key $90 level for Brent crude.

Despite demand concerns, commodity experts at ING maintain a supportive view towards Brent crude, highlighting ongoing uncertainties in the market.