Market Analysis

Oil Prices Rise on Optimism Over Summer Fuel Demand

Amos Simanungkalit · 10 Jun 20243.6K Views

Oil prices declined for the second consecutive session on Monday, pressured by a stronger dollar after robust U.S. jobs data tempered expectations of imminent interest rate cuts. Brent crude futures and U.S. West Texas Intermediate crude futures both edged down slightly to $79.58 and $75.49 per barrel, respectively, as of 0036 GMT.

Friday's data revealing stronger-than-expected U.S. job additions prompted investors to reassess the likelihood of rate cuts, bolstering the dollar and making dollar-denominated commodities like oil costlier for non-dollar holders. Meanwhile, uncertainty in the eurozone increased following French President Emmanuel Macron's call for snap legislative elections later in June, following electoral setbacks.

Analysts are closely watching upcoming meetings of the U.S. Federal Reserve and Bank of Japan this week, with concerns over potentially hawkish outcomes. This could impact decisions within OPEC+ regarding the timing of production cuts amid mixed reactions following recent proposals.

Brent and WTI suffered their third consecutive weekly losses last week amid fears that OPEC+'s plan to ease production cuts from October could exacerbate global supply increases. Commercial OECD crude and product stocks also rose, surpassing typical levels seen during the period from 2015 to 2019, according to energy consultancy FGE.

Looking ahead, expectations of reduced summer holiday demand may help alleviate stockpiles and stabilize prices, with some analysts predicting crude prices to potentially reach mid-US$80 per barrel levels by the third quarter of 2024, contingent on tightening inventory data.

In the U.S., efforts to refill the Strategic Petroleum Reserve intensified last week as prices dipped. Additionally, U.S. energy firms scaled back operations, marking the lowest activity since January 2022, as reported by Baker Hughes.

In the Middle East, discussions between Iraq's Oil Minister Hayan Abdel-Ghani and Kurdistan officials, along with international companies, showed progress towards resuming oil exports via the Iraq-Turkey pipeline, a significant route that previously handled a notable portion of global oil supply.