Oil prices marginally rose in early trade on Tuesday, reaching close to two-month highs due to expectations of increasing fuel consumption during the summer travel season and potential US Federal Reserve rate cuts.
West Texas Intermediate (WTI) crude oil inched up 0.2% to $83.5 per barrel as of 8:36 am GST on Tuesday, while Brent crude edged up 0.3% to $86.8 per barrel around the same time.
In the previous session, the two benchmarks increased by around 2% on an expected peak in demand levels for the ongoing summer season and as a result of the Organization of Petroleum Exporting Countries and its allies, collectively known as OPEC+, deciding to extend its production cuts into 2025.
Regarding the current session, the founder of oil market analysis provider Vanda Insights, Vandana Hari, commented that the change in oil prices "appears to be more fear and sentiment driven than fundamentals." She further highlighted the solid summer demand outlook, the likelihood of escalating tensions between Israel and Iran, and Hurricane Beryl as the reasons for the upward movement in oil costs, said a Reuters report published on Tuesday.
In the US, gasoline demand is forecasted to spike with the arrival of the country's Independence Day on July 4, which will drive the summer travel season. The American Automobile Association has forecasted a 5.2% uptick in travel during the holiday period compared to 2023. It has also projected car travel to be 4.8% higher than the levels reported last year, added the Reuters report.
"This could help gasoline demand recover after a subdued first half of 2024," wrote ANZ analysts in a note.
On the flip side, investors and other market players are gearing up for potential interruptions in global oil supply chains caused by Hurricane Beryl. The hurricane may hurt US oil refining activities and operations at its offshore production sites. As of now, reports show that the storm is likely headed to Mexico's Bay of Campeche, noted Reuters, possibly impacting the local oil production operations taking place there.
