WTI nears $77.50 on increased summer demand

West Texas Intermediate price hovers around $77.50 per barrel during Asian trading on Tuesday, as crude oil prices are bolstered by expectations of increased fuel demand this summer.

According to Reuters, analysts at the energy consulting firm Gelber and Associates noted that, “futures are higher as expectations of summer demand are supportive of prices despite the broader macro landscape remaining less optimistic than weeks previous.”

Furthermore, Goldman Sachs analysts indicated in a note that they anticipate strong summer transport demand will lead to a third-quarter oil market deficit of 1.3 million barrels per day (bpd).

However, a strong US jobs report from the previous week has reinforced the Federal Reserve’s hawkish stance on monetary policy.

The Fed is expected to maintain higher borrowing costs for an extended period, which could slow economic growth and reduce demand for oil. Additionally, a stronger US Dollar can negatively impact oil demand by making USD-denominated commodities like crude oil more expensive for holders of other currencies.

The CME FedWatch Tool indicates that the likelihood of a Fed rate cut in September by at least 25 basis points has decreased to nearly 49.0%, down from 59.5% a week earlier.

Additionally, concerns over a potential oil supply surplus have increased as the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) decided to gradually unwind voluntary cuts from eight member countries starting in October.

By December, over 500,000 barrels per day (bpd) are expected to re-enter the market, with a total of 1.8 million bpd returning by June 2025.

(Source: OANDA)