Oil Prices Surge on Demand Hopes; OPEC Report and Fed Meeting Approaching

Oil prices surged on Monday, ending three consecutive weeks of declines, as optimism about increased summer demand raised expectations that crude supplies could tighten in the coming months.

By 14:12 ET (18:12 GMT), the price of Brent crude climbed 2.3% to $81.49 a barrel, while West Texas Intermediate (WTI) rose 2.7% to $77.58 a barrel.

### Increased Demand for Summer

Concerns over supply exceeding demand had driven bearish sentiment on crude oil close to record highs, according to UBS, referencing a recent report on trader commitments. UBS noted that positioning appears overly pessimistic, predicting that crude supplies will likely decrease throughout the summer.

The latest Commitment of Traders report indicated that for the week ending June 4, there was an increase of 38.5 million barrels in bets against oil prices, while bullish positions totaling about 70.5 million barrels were closed. This shift pushed short positioning toward historic highs.

UBS emphasized that this outlook is too negative, forecasting a downward trend in oil supplies in the weeks ahead as seasonal demand picks up.

Anticipation for an uptick in summer demand coincides with OPEC’s upcoming release of its annual oil supply and demand outlook, expected on Tuesday. Additionally, the International Energy Agency will issue its report on Thursday.

### Upcoming Federal Reserve Meeting and Economic Data

Meanwhile, the dollar’s strength was tempered, exerting minimal influence on oil prices as traders adopted a cautious approach before the Federal Reserve’s meeting on Wednesday. Analysts expect that the central bank will maintain current interest rates and suggest fewer rate cuts for the remainder of the year.

The Fed’s decision, along with consumer price index inflation data due on Wednesday, will play a crucial role in shaping economic outlooks. A weaker dollar generally stimulates oil demand by making it more appealing to international buyers.

### Goldman Sachs Maintains Price Range

Despite various factors influencing the crude market, Goldman Sachs has reiterated its price forecast, projecting a range between $75 and $90 per barrel for this year.

The bank notes that $75 per barrel serves as a floor for Brent crude, citing several reasons: physical demand tends to increase when prices drop, especially from buyers in China and the U.S. Strategic Petroleum Reserve; financial demand could rise as speculative positioning normalizes; U.S. supply will remain price-dependent; and OPEC has the capacity to adjust production rates to stabilize the market. OPEC’s commitment to new production baselines through 2026 further strengthens its market position and reduces the likelihood of significant price drops.

On the flip side, Goldman Sachs indicates that if market conditions improve, OPEC has intentions to gradually unwind its voluntary production cuts starting in the fourth quarter.