Oil prices rose on Monday on hopes for increased fuel demand this summer, but a stronger dollar capped gains as interest rate cuts fade.
Brent crude futures rose 15 cents, or 0.2%, to $79.77 a barrel by 0644 GMT, while WTI crude futures rose 0.1%, or 10 cents, to $75.63 a barrel.
On Friday, data showed the U.S. created more jobs than expected last month, prompting investors to lower their expectations for a rate cut, which helped lift the dollar.
A stronger U.S. dollar makes dollar-denominated commodities like oil more expensive against other currencies.
The euro has also come under pressure, reflecting uncertainty in the eurozone after French President Emmanuel Macron called for snap legislative elections in late June after being crushed in a European Union vote by Marine Le Pen’s far-right party.
For Macron and the election, the surprise upside in US nonfarm payrolls is adding another layer of uncertainty as yields rise. Markets are focused on the US Federal Reserve and Bank of Japan meetings this week, with more hawkish risks looming.
In some OPEC+ member countries, there will be more concerns about when cuts can be returned to the market, given the negative reaction to last week’s OPEC+ meeting.
Brent and WTI reported their third consecutive weekly losses last week on concerns that the OPEC+ plan to lift production cuts from October will contribute to rising global supply.
The announcement coincided with total commercial OECD crude and product stocks rising to an estimated 48 million barrels in May, an increase of 30 million barrels on average between 2015 and 2019.
Analysts and traders expect summer holiday demand to reduce inventories and support prices.
Markets continue to strengthen as we enter Q3 2024, with crude oil prices expected to reach $80/bbl. However, this will require a convincing tightening signal from preliminary inventory data.
Some analysts expect Brent to rise to $86/bbl in the third quarter. Healthy consumers and strong summer demand for transportation and refrigeration are expected to push the market into a significant Q3 deficit of 1.3 mb/d.
Meanwhile, Washington has increased its purchases of crude oil to replenish the Strategic Petroleum Reserve (SPR) after prices fell.
Last week, U.S. energy companies reduced the number of operating oil and gas rigs to the lowest level since January 2022, according to Baker Hughes.
In the Middle East, Iraq said progress was being made in talks with representatives of international companies operating there to restart oil exports through the Iraq-Turkey oil pipeline, which once handled about 0.5% of global oil supplies.
