Oil prices rose on Monday, helped by expected peak summer consumption and OPEC+ production cuts, though gains were capped by rising output from other producers and caution over potential market volatility ahead of pending elections.
Brent crude futures rose 69 cents, or 0.81%, to $85.69 a barrel by 1336 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 59 cents, or 0.72%, at $82.13.
Both contracts gained about 6% in June, with Brent settling above $85 a barrel in the past two weeks after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, extended most of its deep oil output cuts well into 2025.
Oil eases on weak demand
That led analysts to forecast supply deficits in the third quarter as transportation and demand for air-conditioning during the summer eat into fuel stockpiles.
On Friday the Energy Information Administration (EIA) reported that oil production and demand for major products rose to a four-month high in April, supporting prices.
“Demand indicators look solid, especially in the all-important U.S. market, and peak refinery demand for crude is now firmly in place and should last through August,” JPMorgan analysts wrote in a client note.
Investor focus will also be on remarks from U.S. Federal Reserve Chair Jerome Powell on Tuesday, followed by minutes from the Fed’s latest policy meeting on Wednesday and U.S. nonfarm payrolls data due on Friday.
Hopes of an interest rate cut by the Fed and rising political concerns in Europe and between Israel and Lebanon’s Hezbollah have also kept a floor under prices, IG analyst Tony Sycamore said in a note.
Traders are also watching for the impact hurricanes have on oil and gas production and consumption in the Americas. The Atlantic hurricane season started with Hurricane Beryl on Sunday.
“Increased volatility is anticipated in wider markets this week as elections dominate the agenda in Europe and UK, while in the U.S. concerns over President Biden’s fitness for office, let alone re-election, is dominating the news,” said Panmure Gordon analyst Ashley Kelty.
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