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Oil Futures Rise on Strong Economic Data

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Oil futures saw an early rise on Monday, as both Brent and West Texas Intermediate (WTI) crude were on track for significant monthly gains. This surge in prices was driven by robust economic data.

Price Action

  • West Texas Intermediate crude for September delivery rose 1%, or 77 cents, to $81.35 a barrel on the New York Mercantile Exchange.
  • September Brent crude, the global benchmark, was up 0.7%, or 56 cents, at $85.55 a barrel on ICE Futures Europe. The September contract is set to expire today, while October Brent, the most actively traded contract, gained 0.7%, or 62 cents, to $85.03 a barrel.
  • August gasoline fell 0.6% to $2.937 a gallon, while August heating oil remained unchanged at $2.959 a gallon.
  • September natural gas advanced 0.8% to $2.659 per million British thermal units.

Market Drivers

As of Friday’s close, front-month WTI futures had risen by 14.1% in July, while Brent had gained 13.5% for the month, making it the biggest monthly increase since May 2022, according to Dow Jones Market Data. Both WTI and Brent have experienced five consecutive weeks of gains, with WTI returning to positive territory for the year, while Brent has maintained a year-to-date loss of around 1%.

Crude prices have been supported by expectations that the market will shift into a deficit in the second half of the year. This is due to supply cuts implemented by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia. Investors are eagerly awaiting to see if Saudi Arabia will extend its voluntary additional production cut of 1 million barrels a day beyond September.

Furthermore, resilient economic data has contributed to the boost in crude and gasoline futures, with gasoline reaching its highest levels since 2023. However, analysts at Sevens Report Research pointed out that despite these positive factors, implied gasoline demand remains lackluster according to the Energy Information Administration’s weekly report. They emphasized that if this demand doesn’t rebound in the coming weeks, it will be challenging for oil prices to surpass resistance levels between $80 and $83 per barrel.

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