Oil holds near two-month high on summer demand outlook and supply fears

US fuel demand is expected to ramp up as the summer travel season picks up with the Independence Day holiday this week

By Reuters

Published: Tue 2 Jul 2024, 1:34 PM

Last updated: Tue 2 Jul 2024, 1:35 PM

Oil prices were little changed on Tuesday, trading near two-month highs reached in the previous session on expectations of rising demand during the summer driving season and possible supply disruptions from Hurricane Beryl.

Brent crude futures rose 51 cents, or 0.59%, to $87.11 a barrel by 0845 GMT. US West Texas Intermediate (WTI) crude was up 51 cents, or 0.61%, at $83.89.

Both benchmarks gained about 2% in the previous session.

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US gasoline demand is expected to ramp up as the summer travel season picks up with the Independence Day holiday this week. The American Automobile Association has forecast that travel during the holiday period will be 5.2% higher than in 2023, with car travel up 4.8%.

Also supporting oil prices is a rising risk premium linked to Middle East tensions and signs of subsiding inflation in the United States, rekindling hopes of interest rate cuts.

Markets are also watching for possible disruption to US refining and offshore production after Hurricane Beryl struck the Caribbean as a category 4 storm on Monday.

"A dangerous hurricane in the Caribbean Sea is expected to hit Mexico, intensifying concerns regarding the supply side of the equation," said Charalampos Pissouros, senior investment analyst at brokerage XM, adding that recent U.S. data supports the market view that the Federal Reserve is likely to proceed with two quarter-point cuts to interest rates this year.

Increased geopolitical risk also adds to the market's upside potential, said independent energy analyst Tim Evans, though signs of lower than expected demand growth have limited oil price gains.

Some data shows that first-half crude imports to Asia, the world's biggest oil-consuming region, were lower than in the same period last year.