Oil futures are showing slight gains in early trading on Tuesday, reaching their highest levels in three months. Investors are closely monitoring signs of tightening supply and anticipating central bank meetings later in the week.
Price Action
- West Texas Intermediate (WTI) crude for September delivery is up 6 cents, or 0.1%, at $78.80 a barrel on the New York Mercantile Exchange. This marks the highest closing level since April 24.
- September Brent crude, the global benchmark, rose 7 cents, or 0.1%, to $82.81 a barrel on ICE Futures Europe. It closed Monday at its highest point since April 19.
Market Drivers
Oil prices have been lower so far this year, but recent developments suggest a shift towards a deficit in the physical market during the second half of the year. Supply cuts implemented by Saudi Arabia and Russia have contributed to this expectation.
In a bid to support their faltering economy, China’s top leaders have announced plans to boost domestic demand following the easing of strict COVID-19 restrictions earlier this year. This move is significant, as China is a key contributor to global oil demand growth. Analysts at ING commented that these support measures will help alleviate concerns surrounding the slower-than-expected economic recovery in China.
On another front, there are concerns over supply disruptions due to Russia’s escalated bombing of Ukrainian port infrastructure along the Danube River. However, experts have assessed that the current threat of disruption is low.
