Oil Steadies as OPEC+ Restraint Offsets Interest Rate Worries

On Tuesday, global oil prices steadied as potential OPEC+ supply curbs and strong US fuel demand offset concerns over its prolonged high interest rates.

In the Asian afternoon session, Brent futures ending in August rose by 0.01% to $82.89 per barrel, while West Texas Intermediate for July contracts surged by 1.36% to $78.78 a barrel.

Oil prices rose over 1.00% on Monday in subdued trading owing to public holidays in the UK and the US. Expectations of robust fuel demand coinciding with the US summer driving and vacation season provided support.

Despite the notably brighter sentiment in the past two days, an analyst observed that interest rate concerns will likely restrain further significant increases in oil prices in the near term.

He further remarked that it is reasonable to assume that there won’t be any adjustments to production levels at the upcoming meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+).

Meanwhile, concerns about US interest rates staying high for an extended period contributed to crude’s weekly loss last week. Elevated rates increase borrowing costs, potentially reducing economic activity and oil demand.

Despite the prevailing notion that increased interest rates could impede oil demand expansion, an analyst emphasized in a client report that real-time mobility data indicates crude demand growth stays relatively strong.

OPEC+ Meeting Expects Oil Cuts to Hold, Buoy Prices

Traders and analysts anticipate OPEC+ will uphold 2.2 million barrels per day (bpd) voluntary cuts in their online meeting on Sunday, boosting prices.

The organization has reduced production in the past year to bolster oil prices. However, this action briefly supported prices amid concerns about sluggish demand.

Analysts expect crude costs to buoy in the upcoming days as the start of the US driving season will also offer additional support.

Meanwhile, flight analytics firm data revealed a 5.00% month-on-month and nearly 6.00% year-on-year increase in US domestic flight seat numbers for May, exceeding 2019 levels.

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