Oil prices rose on Wednesday, extending recent gains. The increases were driven by hopes that demand will pick up with the approach of the heavily-traveled U.S. summer driving season.
Traders also bet that the Organization of the Petroleum Exporting Countries (OPEC) will keep its current production cuts in place when the group meets over the weekend. Brent crude futures for July delivery rose 0.3 percent to $84.51 per barrel, while West Texas Intermediate crude futures climbed 0.5 percent to $80.19 per barrel.
In addition to the demand optimism, renewed geopolitical tensions in the Middle East also contributed to the strength in crude prices.
The U.S. summer driving season is expected to boost fuel demand in the coming months, providing further support for oil prices. Analysts predict a 2 million barrel draw in overall inventories in upcoming data.
However, the optimism was tempered by concerns over the Federal Reserve’s plans to potentially keep interest rates elevated for longer to tame persistent inflation. This boosted the U.S. dollar, limiting major upside in crude.
The focus this week will be on key U.S. inflation data, as well as speeches from Fed officials and a revised reading on first quarter GDP.
Meanwhile, the OPEC+ group is widely expected to maintain its current 2.2 million barrel per day production cuts when it meets on June 2. This signals tighter oil markets in the coming months, as the cartel seeks to support prices.
Over the past two years, OPEC+ had implemented significant production cuts to prop up oil prices, though the impact had been limited.
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