Crude Oil News Today: OPEC+ Restrictions, Summer Travel Boom Set Bullish Tone

Crude Oil Prices Poised for Upward Momentum

Crude oil prices held steady near two-month highs on Tuesday, setting the stage for potential gains. Brent crude futures and U.S. West Texas Intermediate (WTI) crude both rose, building on the previous session’s 2% increase.

Robust Summer Demand Expectations

The American Automobile Association projects a significant 5.2% increase in travel during the Independence Day holiday compared to 2023, with car travel up 4.8%. This forecast strongly supports expectations of higher gasoline demand as the peak summer driving season kicks into high gear. The anticipated surge in U.S. gasoline consumption is likely to be a key driver for oil prices in the coming weeks.

Supply Disruption Risks

Hurricane Beryl, a powerful category 4 storm that struck the Caribbean on Monday, has heightened concerns about potential disruptions to U.S. refining and offshore production. With the hurricane expected to hit Mexico, the risk to supply has increased, adding a bullish factor to the market.

Investor Positioning

Hedge funds and money managers have significantly increased their positions in petroleum futures and options contracts, according to John Kemp at Reuters. Over the past three weeks, total purchases reached an impressive 260 million barrels. This shift from extreme bearishness to a more neutral stance indicates growing confidence in the oil market’s prospects.

Economic Tailwinds

Recent economic data points to potentially favorable conditions for oil demand. Signs of subsiding inflation in the U.S. have strengthened expectations for Federal Reserve interest rate cuts, possibly as early as September. A report showing U.S. manufacturing activity contracted for the third consecutive month, coupled with lower input prices, further supports the case for monetary easing. These factors are likely to boost economic activity and, consequently, oil demand.

Market Forecast

The outlook for crude oil is decidedly bullish in the short term. OPEC+ is expected to maintain its production restrictions until benchmark crude prices consistently exceed $90 per barrel, providing a solid floor for prices. The combination of strong seasonal demand, potential supply disruptions, and a more accommodative economic environment creates a favorable backdrop for oil prices.

We anticipate Brent crude to test the $90 per barrel mark in the coming weeks, with WTI likely to follow suit. However, traders should monitor U.S. gasoline consumption data and Chinese crude buying activity, as these factors will be crucial in sustaining the upward price momentum.

Technical Analysis

Upside momentum is increasing on Tuesday with the daily chart showing no major resistance until $86.24. In the meantime, light crude oil remains well supported by a short-term retracement zone at $80.83 to $79.16, and the 50-day and 200-day moving averages at $78.87 and $77.69 respectively.