Oil rises on tighter supplies and increasing gasoline demand. On Tuesday, investors expected a tighter market due to seasonal gasoline demand and OPEC+ supply cutbacks, but concerns about a U.S. debt default restrained advances.
Brent crude increased 35 cents, or 0.46%, to $76.34 a barrel by 0630 GMT, while WTI rose 36 cents, or 0.50%, to $72.41.
Brent climbed 0.5% on Monday. WTI rose 0.6%, while U.S. gasoline futures rose 2.8% ahead of Memorial Day, which generally kicks off the high summer fuel demand season.
“Oil prices are consolidating their bottoms, helped by a seasonal increase in U.S. gasoline demand from next week, production cuts by OPEC+ from this month, and planned U.S. purchases to refill the Strategic Petroleum Reserve (SPR),” said Hiroyuki Kikukawa, president of NS Trading, a Nissan Securities unit.
Last Monday, the U.S. Department of Energy announced it would buy 3 million barrels of crude oil to replenish the SPR in August.
OPEC+’s voluntary production curbs, which began this month, will also likely tighten oil prices.
Goldman Sachs analysts said on Monday that they “expect sustained (oil supply) deficits from June as OPEC+ production cuts fully realize and demand rises further.”
On Monday, a Vitol executive claimed Asia would increase oil demand by 2 million barrels per day (bpd) in the year’s second half.
Investors particularly focus on U.S. debt limit negotiations, the world’s largest oil user. A U.S. default would disrupt financial markets and raise interest rates, hurting fuel demand locally and worldwide.
President Joe Biden and House Speaker Kevin McCarthy left talks on Monday without a deal to increase the U.S. government’s $31.4 trillion debt ceiling. Still, they will continue negotiating ten days before a possible default.
“The central focus for the broader risk environment has been revolving around the U.S. debt ceiling talks, and while that is keeping a cautious lid on upside for now, a positive up move on any eventual resolution on that front may remain on the table,” said IG Singapore market strategist Jun Rong Yeap.
