Market Analysis

Oil prices climbed on Monday, buoyed by expectations of peak summer demand and ongoing production cuts by OPEC+. Brent crude futures saw an increase of 42 cents to $85.42 a barrel by 0845 GMT, while U.S. West Texas Intermediate crude futures rose by 44 cents to $81.97.

Throughout June, both contracts registered approximately 6% gains, with Brent surpassing $85 per barrel over the past fortnight following OPEC+'s decision to extend significant oil output reductions well into 2025. Analysts foresee supply shortfalls in the third quarter due to increased transportation and air-conditioning demand during the summer, which are expected to draw down fuel inventories.

The Energy Information Administration (EIA) reported on Friday that oil production and demand for major products reached a four-month peak in April, lending further support to prices.

JPMorgan analysts highlighted robust demand indicators, particularly in the crucial U.S. market, with peak refinery demand for crude firmly established and expected to last until August.

Market sentiment was also influenced by expectations of a potential interest rate cut by the U.S. Federal Reserve and escalating geopolitical tensions in Europe, Israel, and Lebanon involving Hezbollah, which have helped maintain a price floor, according to IG analyst Tony Sycamore.

Traders are closely monitoring the Atlantic hurricane season's impact on oil and gas production and consumption in the Americas, starting with Hurricane Beryl on Sunday.

"This week, broader markets are poised for increased volatility as elections dominate the agenda in Europe and the UK. In the U.S., concerns about President Biden's fitness for office and potential re-election are prominent in the news," noted Panmure Gordon analyst Ashley Kelty.

Paraphrasing text from "Reuters" all rights reserved by the original author.