Oil up on prospect of Opec+ holding cuts, weaker US dollar

OIL prices rose by more than US$1 a barrel on Tuesday on the expectation that Opec+ will maintain crude supply curbs at its June 2 meeting, while a weaker US dollar made the commodity more attractive to holders of other currencies.

The July contract for global benchmark Brent crude rose US$1.04, or 1.3 per cent, to US$84.14 a barrel by 1.05 pm EDT (1705 GMT). US West Texas Intermediate crude (WTI) was at US$79.78, up US$2.06, or 2.7 per cent, from Friday’s close, having traded through Monday’s US mark Memorial Day holiday without a settlement.

For the online meeting of Opec+ oil producers coming up on Sunday, traders and analysts are predicting 2.2 million barrels per day of voluntary production cuts to stay in place.

“We expect Opec+ to extend the current cut for at least another three months at its upcoming meeting,” UBS analysts said in a note.

Oil extended a more than 1 per cent rise in trade on Monday that was muted due to the holiday, with hopes of a demand boost from the recent launch of the US summer driving and vacation season providing support.

“This week’s upside follow through is being facilitated by a significant weakening in the dollar and a growing consensus that Opec+ will extend production cuts at the upcoming weekend meeting,” said Jim Ritterbusch of Ritterbusch and Associates.

The dollar slipped 0.1 per cent to a more than one-week low.

Worries over US interest rates remaining elevated for a longer period contributed to a weekly loss for crude last week. Higher rates boost the cost of borrowing, which can dampen economic activity and demand for oil.

Investors will watch the US core personal consumption expenditures price index (PCE), which is a main inflation gauge for the Federal Reserve, due on Friday.

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“Despite the indisputably brighter mood seen in the last two days, interest rate concerns will most plausibly act as a (brake) on further attempts to send oil prices meaningfully higher in the immediate future,” said Tamas Varga of broker PVM.

Air travel data also helped to buoy oil prices, with US seat numbers on domestic flights for May rose by 5 per cent month on month and almost 6 per cent year on year to slightly above 90 million, data from flight analytics company OAG showed, surpassing 2019 levels. REUTERS