Oil prices surge on summer demand optimism

Oil prices jumped by around three percent on Monday, hitting a one-week high as hopes for increased fuel demand during the upcoming summer months boosted market sentiment. This positive outlook comes despite a stronger US dollar and expectations of prolonged higher interest rates by the US Federal Reserve, which had raised rates significantly in 2022 and 2023 to combat rising inflation.

The surge in oil prices was driven by the anticipation of robust summer demand, with Brent futures rising by 2.5 percent to $81.63 per barrel and US West Texas Intermediate (WTI) crude climbing 2.9 percent to $77.74 per barrel. These levels marked the highest since May 30, reflecting the market's optimism.

Analysts from Gelber and Associates highlighted the summer demand as a key factor supporting prices, even amidst a less favorable macroeconomic environment. Goldman Sachs projected Brent to reach $86 per barrel in the third quarter, citing strong transport demand that is expected to create a third-quarter deficit of 1.3 million barrels per day.

On the currency front, the US dollar strengthened against other currencies, with the euro facing pressure due to political uncertainties in Europe following recent election outcomes. Oil prices had faced downward pressure in the previous weeks amid concerns that OPEC+ might increase production cuts from October, potentially leading to a supply surge despite ongoing efforts to reduce inventories.

Looking ahead, FGE expressed optimism for a potential oil rally, forecasting prices to reach the mid-$80s in the third quarter. Market attention is focused on upcoming data releases, including the US consumer price index for May and the conclusion of the Fed's policy meeting, which is expected to maintain current interest rates.

The oil market is experiencing a mix of factors influencing prices, from summer demand optimism to currency fluctuations and geopolitical uncertainties. While the market remains cautiously optimistic, ongoing developments in supply, demand, and monetary policy will continue to shape oil price movements in the coming weeks.