NEW YORK: Oil prices edged up 1% on Monday (May 22) with a rise in US petrol futures and forecasts for oil demand to rise in the second half of the year, while supplies from Canada and Opec+ declined in recent weeks.
Oil prices, however, were held in check by a stronger dollar and as the market waited for news on the US debt ceiling talks.
Brent futures for July delivery rose 41 cents, or 0.5%, to settle at US$75.99 (RM345.56) a barrel.
US West Texas Intermediate (WTI) crude for June delivery rose 44 cents, or 0.6%, to settle at US$71.99 (RM327.37) per barrel, while the more active July contract, which is now the new front-month, rose 0.5% to settle at US$72.05.
US petrol futures were the biggest price mover, gaining 2.8% to a one-month high of US$2.6489 per gallon.
“Gasoline (petrol) powered today’s upside oil price advance with ... the approach of the Memorial Day holiday,” analysts at energy consulting firm Ritterbusch and Associates said in a note.
The US Memorial Day holiday marks the start of the peak summer driving season.
The International Energy Agency, meanwhile, warned of a looming oil shortage in the second half of the year when demand is expected to eclipse supply by almost 2 million barrels per day (bpd), the Paris-based agency said in its latest monthly report.
A senior executive at Vitol said Asia will lead oil demand growth of around 2 million bpd in the second half of the year, an increase that could potentially lead to a shortage of supply and drive up prices.
Last week, both oil benchmarks gained about 2% in their first weekly rise in five after wildfires shut in large amounts of crude supply in Alberta, Canada.
The impact of voluntary production cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, known as Opec+, is also being felt after going into effect this month.
“Crude prices are in no man’s land as energy traders look to see what happens with both debt ceiling talks and with US and China tensions,” said Edward Moya, senior market analyst at data and analytics firm Oanda.
US President Joe Biden and top congressional Republican Speaker Kevin McCarthy were to meet later Monday to discuss raising the federal government's debt ceiling, just 10 days before the US could face an unprecedented default.
The US dollar rose against a basket of other currencies, holding just below a two-month high, as investors waited on fresh signals on whether the US Federal Reserve is likely to continue hiking interest rates and watched for news on the US debt ceiling.
A stronger dollar can weigh on oil demand by making the fuel more expensive for holders of other currencies.
In Lagos, Nigeria's President Muhammadu Buhari on Monday commissioned an oil plant billed as Africa's largest oil refinery, after years of delays and a week before stepping down from office.
Built by Africa's richest person Aliko Dangote in the commercial hub of Lagos, the refinery should begin operations in June with the first products expected on the market by August though some analysts said it could be later.
Once at full capacity, it will have the ability to process 650,000 barrels a day, according to the company. – Reuters, AFP