Oil prices gained about 2% to a two-month high on Monday, reaching levels not observed in the past two months. Brent crude futures rose $1.60, or 1.9%, to settle at $86.60 per barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.84, or 2.3%, to settle at $83.38. The increase in oil prices is attributed to seasonal demand during the Northern Hemisphere's summer driving season and worries that conflict in the Middle East could spread and reduce global oil supplies. Geopolitical tensions, including tensions between Israel and Hezbollah, are contributing to the price increase. Additionally, the threat of Hurricane Beryl impacting oil-producing areas in Mexico is also a factor. The decision by OPEC+ to extend production cuts until 2025 further supports the rise in prices [f6b46502].
Rising demand for fuel helped lift prices for U.S. oil products by around 3% on Monday, with diesel futures closing at their highest in 10 weeks and gasoline futures closing at their highest in eight weeks. The U.S., the world's biggest oil consumer, is expected to see increased demand as the summer travel season picks up with the Independence Day holiday. The threat of Hurricane Beryl and reduced crude imports into Asia, especially China, are also impacting the market [963adebf].
The recent increase in oil prices comes amid signs of subsiding inflation and contracting U.S. manufacturing activity. The U.S. Manufacturing Purchasing Managers’ Index (PMI) showed a contraction, indicating a slowdown in manufacturing activity, which could signal a decrease in inflation. Investors are closely watching for potential interest rate cuts by the Federal Reserve, which may occur in September. However, signs of less-than-expected demand growth have limited gains in oil prices, with crude imports to Asia in the first half of 2024 lower than last year, mainly due to lower imports into China [f6b46502].