Oil Prices Rise as Supply Tightens and Demand Increases

By Gina Lee

Oil prices saw an uptick in Asia as the upcoming peak driving season in the U.S. is anticipated to increase fuel demand.

Prices rose by 0.63% to $110.71 and climbed 0.54% to $110.88 during the early hours of trading.

According to Stephen Innes, managing partner at SPI Asset Management, “Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak U.S. driving season.” He added that refineries are generally operating at increased capacity to satisfy the strong demand from drivers.

The peak driving season in the U.S. typically commences on Memorial Day weekend and concludes on Labor Day in September.

Despite worries that surging oil prices might impact demand, mobility data indicates that more people are traveling on the roads in the U.S. Analysts from ANZ noted, “High-frequency data suggests demand continues to grow.”

Additionally, a weakening dollar provided support for oil prices, as it makes crude oil cheaper for buyers using other currencies.

However, concerns about ongoing COVID-19 lockdowns in China tempered gains. China, being the world’s largest oil importer, is easing restrictions in Shanghai, and the central bank has shown support for a recovery.

Furthermore, the European Union has yet to reach an agreement on the prohibition of Russian oil following the invasion of Ukraine, which has also limited price increases in the market.