Oil futures are on the rise early Monday, building on a fourth consecutive weekly increase. This upward trajectory is fueled by expectations that crude supplies will tighten in the second half of the year.
- West Texas Intermediate (WTI) crude for September delivery rose 0.5% to $81.46 a barrel on the New York Mercantile Exchange.
- September Brent, the global benchmark, increased by 0.5% to $81.48 a barrel on ICE Futures Europe.
- Gasoline and heating oil prices also experienced gains, rising by 1.1% to $2.832 a gallon and $2.775 a gallon, respectively.
- August natural gas saw a modest increase of 0.1% at $2.715 per million British thermal units.
WTI and Brent crude saw respective gains of 2.3% and 1.5% last week. Although oil prices remain lower year-to-date, they have found stability due to expectations of a deficit in the physical market during the second half of the year. The supply cuts initiated by Saudi Arabia and Russia have contributed to these expectations.
Despite a bounce by the U.S. dollar last week, crude prices remained firm. This indicates that the supply-side restrictions implemented by OPEC+ are effectively creating upward price pressures.
According to Tim Waterer, chief market analyst at KCM Trade, trading ranges may start to narrow as some traders reduce risk positions ahead of Wednesday’s rate decision by the Federal Reserve. Economists predict a quarter-point rate increase, which is likely to be the final one in an aggressive cycle of hikes that began in March 2022.
However, Waterer warns that if the Fed’s signaling doesn’t align with market expectations, it could lead to heightened volatility.