Oil prices stabilise as OPEC+ curbs balance rate concerns

by Jonathan Adams
investing in oil gas

The July contract for Brent, the global benchmark, gained 17 cents or 0.2% to $83.27 a barrel

Global oil prices stabilised on Tuesday as the prospect of OPEC+ maintaining oil supply curbs at its June 2 meeting and hopes of strong U.S. summer fuel demand balanced concern about higher U.S. interest rates.

On Monday, oil gained more than 1% in muted trade amid public holidays in Britain and the US, as hopes of strong fuel demand with the start of the U.S. summer driving and vacation season provided support.

The July contract for Brent, the global benchmark, gained 17 cents or 0.2% to $83.27 a barrel by 0810 GMT. U.S. WTI crude was at $78.79, up $1.07 or 1.4%, from Friday’s close, having traded through a U.S. holiday to mark Memorial Day without a settlement.

Despite the indisputably brighter mood seen in the past 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, according to Tamas Varga of broker PVM.

It is a fair assumption that no changes in production levels will be forthcoming, he added regarding the OPEC+ meeting.

Concerns over U.S. interest rates remaining higher for a longer period helped send crude into a weekly loss last week. Higher rates raise the cost of borrowing, which can dampen economic activity and demand for oil.

However, despite the general view that high interest rates could result in weaker oil demand growth, “real-time mobility data indicates oil demand growth is still broadly healthy,” UBS analyst Giovanni Staunovo wrote in a client note.

Coming up is the online meeting of OPEC+ producers on Sunday, where traders and analysts are expecting 2.2 million bpd of voluntary production cuts to stay in place and raise prices further.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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