Interest Rate Concerns
Despite the recent upbeat sentiment, concerns over persistent high U.S. interest rates could limit further significant gains in oil prices. Higher interest rates elevate borrowing costs, potentially slowing economic activity and reducing oil demand. Last week, these concerns contributed to a weekly decline in crude prices.
Healthy Oil Demand Signals
UBS analyst Giovanni Staunovo noted that despite fears of softer demand growth due to high interest rates, real-time mobility data shows that oil demand remains robust. Supporting this, U.S. air travel has surged, with domestic flight seat numbers in May increasing by 5% month-on-month and nearly 6% year-on-year, surpassing 2019 levels, according to flight analytics firm OAG.
OPEC+ Meeting Expectations
Looking ahead, traders are focused on the upcoming OPEC+ meeting on June 2. The market anticipates that the group will maintain voluntary production cuts of 2.2 million barrels per day, which should support prices. The start of the U.S. summer driving season is also expected to bolster demand and prices.
Saudi Arabia’s Potential Price Cuts to Asia
In a separate development, Saudi Arabia may reduce July oil prices to Asia for the first time in five months. Sources suggest the official selling price for Arab Light crude could fall by 30 to 50 cents per barrel due to weakened Middle East benchmarks and Asian refining margins. The narrowing backwardation in the Dubai market has influenced this potential price cut, signaling eased supply tightness.
Market Forecast: Bullish Outlook
Given the anticipated OPEC+ supply cuts and robust U.S. summer demand, oil prices are expected to move higher in the short term. The pressure from sustained high U.S. interest rates and potential price adjustments by major producers like Saudi Arabia will be key factors to monitor. Overall, the market appears poised for a bullish run, dependent on these factors and broader economic conditions.
Technical Analysis
Read More: Crude Oil News Today: Anticipated OPEC+ Supply Curbs Supporting Prices