Crude oil prices started the week slightly higher on prospects of increased fuel demand during the summer driving season.
The remainder of the session could still see volatility as strong U.S. employment data released last Friday is likely to have dented interest rate cut expectations and further improved demand.
Bureau of Labor Statistics report Nonfarm payrolls rose by 272,000 in May, beating expectations and helping to strengthen the dollar. The unemployment rate also rose to 4%, but the market was focused on the employment gains ahead of the Fed meeting this week.
Meanwhile in Europe, the euro was pressured by an expected right-wing wind from Sunday’s European Parliament elections sweeping several EU member states and raising uncertainty in commodity markets. news In France, Marine Le Len’s National Rally won a landslide victory and general elections are expected to be held at the end of the month, but this did not help oil prices.
“The Macron and election talks are creating fresh uncertainty after a surprise upside in U.S. nonfarm payrolls sent yields soaring,” Reuters reported. Quote “The tech giant is looking to make a big push forward,” said IG analyst Tony Sycamore.
“Given the negative reaction this proposal received following last week’s OPEC+ meeting, this will likely leave some OPEC+ members even more anxious about when they will be able to bring production cuts back into the market,” Sycamore added.
Warren Patterson and Eva Manthey of ING noted that a bearish mood still prevailed in the oil market, with repositioning including a drop of more than 102,000 in net long positions in ICE Brent crude to 5,678. The analysts noted that current long positions in the international benchmark crude are at their lowest since 2014.
Another factor weighing on oil prices has been rising inventories in OECD countries: Energy consultancy FGE reported onshore inventories at 48 million barrels in May, well above the 2015-2019 average of 30 million barrels.
However, FGE remained bullish for the rest of the year, saying, “We continue to expect the market to strengthen as we enter the third quarter of 2024, with oil prices reaching the mid-$80s per barrel, although preliminary inventory data will likely require a compelling signal of tightening.”
By Irina Slav of Oilprice.com
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