Crude oil prices edged up 1% on Monday with a rise in U.S. gasoline futures and forecasts for oil demand to rise in the second half of the year, while supplies from Canada and OPEC+ declined in recent weeks.
Oil prices, however, were held in check by a stronger dollar and as the market waited for news on the U.S. debt ceiling talks.
Brent futures for July delivery rose 41 cents, or 0.5%, to settle at $75.99 a barrel. U.S. West Texas Intermediate (WTI) crude for June delivery rose 44 cents, or 0.6%, to settle at $71.99 per barrel, while the more active July contract , which is now the new front-month, rose 0.5% to settle at $72.05.
U.S. gasoline futures were the biggest price mover, gaining 2.8% to a one-month high of $2.6489 per gallon.
“Gasoline powered today’s upside oil price advance with … the approach of the Memorial Day holiday,” analysts at energy consulting firm Ritterbusch and Associates said in a note.
The U.S. Memorial Day holiday marks the start of the peak summer driving season.
The International Energy Agency (IEA), meanwhile, warned of a looming oil shortage in the second half of the year when demand is expected to eclipse supply by almost 2 million barrels per day (bpd), the Paris-based agency said in its latest monthly report.
A senior executive at Vitol said Asia will lead oil demand growth of around 2 million bpd in the second half of the year, an increase that could potentially lead to a shortage of supply and drive up prices.
Last week, both oil benchmarks gained about 2% in their first weekly rise in five after wildfires shut in large amounts of crude supply in Alberta, Canada.
The impact of voluntary production cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, known as OPEC+, is also being felt after going into effect this month.
Oil production in Iraq’s Kurdistan region continued to drop as export flows to Turkey’s Ceyhan port show few signs of restarting after a stoppage that has lasted almost two months.
Total exports of crude and oil products from OPEC+ plunged by 1.7 million bpd by May 16, JP Morgan said, adding that Russian oil exports will likely fall by late May.
On Saturday, the Group of Seven (G7) nations pledged at its annual leaders’ meeting to enhance efforts to counter Russia’s evasion of the price caps on its oil and fuel exports.
The G7 meeting, however, upset China, the world’s biggest oil importer. State-backed Chinese newspaper Global Times called the G7 an “anti-China workshop.”
The G7 singled out China on issues including Taiwan, nuclear arms, economic coercion and human rights abuses.
“Crude prices are in no man’s land as energy traders look to see what happens with both debt ceiling talks and with U.S. and China tensions,” said Edward Moya, senior market analyst at data and analytics firm OANDA.
U.S. President Joe Biden and top congressional Republican Speaker Kevin McCarthy will meet on Monday to discuss raising the federal government’s debt ceiling, just 10 days before the U.S. could face an unprecedented default.
The U.S. dollar rose against a basket of other currencies, holding just below a two-month high, as investors waited on fresh signals on whether the U.S. Federal Reserve is likely to continue hiking interest rates and watched for news on the U.S. debt ceiling.
A stronger dollar can weigh on oil demand by making the fuel more expensive for holders of other currencies.
U.S. Minneapolis Fed President Neel Kashkari said it was a “close call” whether he would vote to raise interest rates or pause the central bank’s tightening cycle when it meets next month.
Higher interest rates boost borrowing costs, which can slow the economy and reduce oil demand.