Global oil prices surge to four-week high

WEB DESK: Oil prices surged to a four-week high on Wednesday, driven by anticipation of major producers extending output cuts during an upcoming meeting and the projected uptick in fuel consumption as the peak summer demand period commences.

Brent crude futures for July delivery climbed 62 cents, or 0.7 per cent, reaching $84.84 a barrel by 1050 GMT, marking their highest level since May 1 at $85.02.

Similarly, U.S. West Texas Intermediate futures for July rose by 62 cents, or 0.8 per cent, hitting $80.45, also reaching their highest since May 1 at $80.62. Both benchmarks experienced over a 1 per cent increase on Tuesday.

Analysts and traders foresee the OPEC+ alliance, consisting of the Organization of the Petroleum Exporting Countries (OPEC) and partners like Russia, maintaining voluntary production cuts of approximately 2.2 million barrels per day (bpd).

Helima Croft, an analyst at RBC Capital, commented, “We see no appetite at this juncture to add more barrels to the market and trigger another price move to the downside.” She noted concerns that the current price levels are prompting some producers to incur additional debt and delay high-profile projects.

The onset of the summer season in the northern hemisphere, which typically sees heightened demand for road and aviation fuels, further bolstered prices. ANZ commodities strategist Daniel Hynes remarked, “Initial data suggest a relatively high number of U.S. holiday trips have been taken over the Memorial Day holiday, the traditional start of the driving season. Air travel has also been strong.”

Investors keenly awaited the release of U.S. crude inventory data from the American Petroleum Institute, which was postponed by a day due to the Memorial Day holiday on Monday. Preliminary forecasts from a Reuters poll indicated an expected decline of approximately 1.9 million barrels in U.S. crude oil stockpiles last week.

Furthermore, investors awaited Friday’s report on the U.S. core personal consumption expenditures (PCE) price index for April. This report, considered by the Federal Reserve as its preferred inflation gauge, is expected to remain stable on a monthly basis.

The outcome could influence expectations for interest rate adjustments, thereby impacting oil prices. Notably, expectations regarding the timing of rate adjustments have fluctuated, with policymakers showing caution due to persistent inflation concerns.

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