On Tuesday, oil prices surged following traders’ hopes of increased summer demand and likely supply risks from geopolitics and weather-related turmoil.
In the Asian afternoon session, Brent futures for the September contract rose by 0.25% to $86.82 a barrel, and West Texas Intermediate (WTI) futures ending in August increased by 0.17% to $83.52 per barrel.
Crude markets generally climbed, shaking off concerns about mixed economic data from China and weaker-than-expected US fuel demand. Additionally, awaiting further interest rate signals this week, the strong dollar did not hinder oil’s bullish trend.
Meanwhile, oil’s recent surge was primarily fueled by expectations that US fuel demand would increase with the start of the travel-intensive summer season.
The American Automobile Association (AAA) has forecasted a surge in car travel this week, driven by the Independence Day Holiday, which is expected to boost fuel demand significantly.
Furthermore, AAA said they expect this July 4th to be the busiest ever, with an additional 5.7 million people traveling compared to 2019.
Rising summer travel suggests a boost in fuel demand, but the recent, continuous increase in US fuel stocks has raised questions about the strength of this trend.
Mideast War, Weather Interruption Might Affect Oil Stockpile
According to reports, the Mideast war has supported the surge of crude demand prices, but there is likely supply turmoil due to Hurricane Beryl in the US.
A key factor supporting crude in recent sessions has been heightened concerns about a potential full-scale war in the Mideast, as tensions between Israel and Hezbollah over Gaza persist with no sign of relief.
Moreover, traders have added higher risk premiums to oil due to conflict, betting on potential supply disruptions from the Middle East in the event of a large war.
Ongoing clashes between Russia and Ukraine, with Kyiv targeting Moscow’s oil infrastructure, have also contributed to crude’s risk premium.
Meanwhile, the potential for supply disruptions from Hurricane Beryl in the US added to the outlook of tighter crude markets. Beryl was projected to move towards Mexico, which would likely affect offshore oil production.
