Global oil prices climbed on Tuesday, May 28, 2024 amid expectations that OPEC+ will uphold crude supply curbs at its upcoming June 2 meeting. Concurrently, a weaker U.S. dollar increased the commodity’s appeal to holders of other currencies.
The July contract for Brent crude, the global benchmark, rose by 57 cents, or 0.7%, to $83.67 a barrel by 10:58 p.m. EDT (1458 GMT). Meanwhile, U.S. West Texas Intermediate (WTI) crude was at $79.36, up $1.64, or 2.1%, from Friday’s close, having traded through a U.S. holiday to mark Memorial Day without a settlement.
Oil extended its more than 1% rise in Monday’s trade, muted due to the holiday, with hopes of a demand boost from the recent launch of the U.S. summer driving and vacation season providing support. Jim Ritterbusch of Ritterbusch and Associates remarked, “This week’s upside follow through is being facilitated by a significant weakening in the dollar and a growing consensus that OPEC+ will extend production cuts at the upcoming weekend meeting.”
The dollar slipped 0.1% to a more than one-week low. Worries over U.S. interest rates remaining elevated for a longer period contributed to a weekly loss for crude last week. Higher rates increase borrowing costs, which can dampen economic activity and demand for oil.
Investors will watch the U.S. core personal consumption expenditures price index (PCE), a key inflation gauge for the Federal Reserve, due on Friday. Tamas Varga of broker PVM commented, “Despite the indisputably brighter mood seen in the last two days, interest rate concerns will most plausibly act as a brake on further attempts to send oil prices meaningfully higher in the immediate future.”
Despite concerns over high interest rates potentially resulting in softer oil demand growth, “real-time mobility data indicates oil demand growth is still broadly healthy,” UBS analyst Giovanni Staunovo wrote in a client note.
On the air travel front, U.S. seat numbers on domestic flights for May rose by 5% month on month and almost 6% year on year to slightly above 90 million, data from flight analytics company OAG showed, surpassing 2019 levels.
The upcoming online meeting of OPEC+ oil producers on Sunday is expected to maintain 2.2 million barrels per day of voluntary production cuts. “It is a fair assumption that no changes in production levels will be forthcoming,” PVM’s Varga said.
