Crude Settles Higher Ahead of Fresh Inventory Data

Oil Prices Rise Amid Anticipation of Increased Demand

Oil prices experienced an uptick on Tuesday as traders awaited new inventory data, assessing expectations for increased demand with the summer season now underway.

By 14:30 ET (18:30 GMT), crude oil futures rose by 1.5%, settling at $81.57 a barrel, while the Brent contract climbed 1.3%, reaching $85.33 a barrel.

Focus on U.S. Inventories

Investors are closely monitoring the latest forecasts for U.S. crude stockpiles, which are expected to be released later in the day. The American Petroleum Institute (API) is set to share its estimates, ahead of the official figures due on Thursday—a day later than typical because of Wednesday’s Juneteenth holiday.

Analysts surveyed anticipate that crude inventories will have decreased by 2.3 million barrels for the week ending June 14.

According to Bank of America, there is a general consensus predicting higher oil prices as we progress into the third quarter. However, it remains uncertain whether market conditions will shift from a significant surplus to a deficit that would support price increases by the third quarter of 2024. Extended production cuts by OPEC+ may provide some assistance, particularly if compliance remains strong and countries like Russia, Iraq, and Kazakhstan address previous shortfalls during the summer months. Conversely, if inventory levels continue to climb into the third quarter, oil prices may face downward pressure.

The upcoming inventory data is crucial for investors looking to assess the balance between supply and demand, at a time when many are optimistic for a seasonal uplift in demand.

Demand and Supply Balance Uncertainty

Both crude contracts surged by approximately 2% on Monday, closing at their highest levels since April, buoyed by the anticipation that the summer vacation season in the Northern Hemisphere will enhance fuel demand. Nonetheless, the global benchmark, Brent, remains significantly below the $90 highs reached in mid-April.

Bank of America analysts noted that as tensions in the Middle East diminished and concerns about supply disruptions subsided in April, the oil market returned its focus to fundamental factors, which have been relatively weak for some time. An oversupply situation has been attributed to supply growth as well as slowed demand growth, with first-quarter consumption averaging 890,000 barrels per day (b/d), down from an average of 2.1 million b/d in 2024.

Recent data from China indicated issues in the recovery of the world’s second-largest economy, which is also the largest crude importer globally. In the U.S., economic growth was reported to have accelerated by only 0.1% in May—below the anticipated 0.3%—suggesting that high interest rates may be constraining consumer spending and economic activity.

Traders are also keenly awaiting further insights into interest rate policies and their potential impact on U.S. demand, as several officials from the Federal Reserve are scheduled to speak later on Tuesday.