Crude Oil Prices Rise Amid Stronger Demand Expectations and Geopolitical Tensions

Current Performance: U.S. crude futures increased on Tuesday, boosted by expectations of stronger fuel demand as Memorial Day weekend marked the start of the summer driving season. West Texas Intermediate (WTI) crude is currently up 1.38% for the week, trading above at $79 a barrel.

Summer Driving Season: The start of the U.S. summer driving season is traditionally associated with higher fuel demand. Early signs point to relatively strong level of holiday travel, contributing to the rise in crude prices. However, gasoline consumption may be tempered by the increasing prevalence of electric vehicles.

Middle East Conflict: Prices are also supported by heightened geopolitical risks following an Israeli airstrike that resulted in civilian casualties in Rafah and a cross-border clash that left an Egyptian officer dead. Such events typically increase concerns about potential disruptions to oil supply, supporting higher prices.

Technical Levels: The bullish momentum faces a critical test at the $80.00 resistance level. Breaking above this could signal further gains, while failure to do so may see prices consolidate or pull back to the recent range area between $80 and $77.

Inventory Data: Traders are focused on US weekly barrel inventory counts from both the American Petroleum Institute (API) and the Energy Information Administration (EIA), due on Wednesday and Thursday, respectively. Last week saw an unexpected buildup in US crude oil supplies. However, market forecasts for this week predict a decline, with EIA weekly barrel counts expected to decrease by two million barrels.

U.S. PCE Price Index: The market is closely watching the U.S. Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, which is due for release on Friday. This data could influence the Federal Reserve’s future monetary policy decisions.

OPEC+ Production Cuts: The Organization of the Petroleum Exporting Countries (OPEC) and its extended network, OPEC+, are broadly expected to maintain voluntary production cuts. These cuts, initially adopted in 2023, aim to prop up global crude oil prices amid increasing US production that outpaces demand. The upcoming OPEC+ meeting on Sunday, June 2^nd will be closely watched for any decisions on production limits.

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