Oil prices edged up in Asia on Tuesday, extending gains from the previous session, buoyed by expectations of strong fuel demand from the U.S. during the summer, and ahead of an output policy decision from OPEC+ at a June 2 meeting.
July Brent crude rose 6 cents to $83.16 a barrel by 0608 GMT. The more-active August futures rose 5 cents to $82.93.
U.S. West Texas Intermediate (WTI) crude futures for July were at $78.80 a barrel, up $1.08, or 1.39%, from Friday’s close, having traded through a U.S. holiday to mark Memorial Day without a settlement.
Oil prices rose over 1% on Monday in muted trade owing to public holidays in Britain and the United States after a downbeat week characterised by the outlook for higher-for-longer U.S. interest rates in the face of sticky inflation.
Expectations of strong fuel demand with the start of the U.S. summer driving and vacation season provided price support, some analysts said.
Despite the general view that elevated interest rates could result in softer oil demand growth, “real-time mobility data indicates oil demand growth is still broadly healthy,” said UBS analyst Giovanni Staunovo in a client note.
On the air travel front, U.S. seat numbers on domestic flights for May rose by 5% month-on-month and almost 6% year-on-year to slightly above 90 million, data from flight analytics firm OAG showed, surpassing 2019 levels.
International flight seat numbers for May rose by 11% on-year to around 14.2 million, with the levels also 8% higher than the same period in 2019, the data added.
Meanwhile, all eyes will also be on the upcoming online meeting of the OPEC+ on Sunday, where traders and analysts are expecting production cuts to stay in place and buoy prices further.
“We expect oil prices to move higher in the coming days due to anticipated continued voluntary output cuts by oil producers and growing prospects for easing of U.S. monetary policy,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
Yoshida added that the beginning of the U.S. driving season will also provide support.
Earlier, three sources from OPEC+ countries said an extension of voluntary output cuts of 2.2 million barrels per day into the second half of the year was likely.
Lending further support to prices was bullish demand expectations from China after Beijing set up its third planned state-backed investment fund to boost its semiconductor industry.
“Another positive driver for oil is an indirect external demand loop from China as more stimulus measures are being announced to support the local semiconductor industry by setting up a $47.5 billion chip fund (Big Fund III), the highest funded amount versus the previous two phases as part of the National Integrated Circuit Industry Investment Fund,” said OANDA senior market analyst Kelvin Wong.
