Crude Oil News Today: Bullish Traders Banking on US Summer Demand Surge

Oil Prices Hold Steady Amid Supply Risks and Demand Uncertainty

Oil prices maintained stability on Tuesday, with Brent and U.S. crude futures showing modest gains following two consecutive weeks of increases. The market is carefully balancing supply concerns against an uncertain demand outlook, keeping traders on their toes.

At 10:00 GMT, Light Crude Oil Futures are trading $81.28, down $0.35 or -0.43%.

Supply Risks

Geopolitical tensions continue to underpin oil prices, keeping supply disruption fears at the forefront. The ongoing conflict in Gaza, where Israeli air strikes have resulted in Palestinian casualties, highlights the region’s volatility. Adding to the supply-side pressure, Ukrainian attacks on Russian oil infrastructure have intensified. Ukraine’s President Zelenskiy reported strikes on over 30 Russian oil processing and storage facilities, including recent drone attacks on four refineries in southern Russia.

Further complicating the supply picture, the European Union has agreed on a new package of sanctions against Russia. These measures include a ban on reloading Russian liquefied natural gas in EU countries for shipment to third parties, potentially tightening global energy supplies.

Mixed Demand Signals

On the demand side, the picture is less clear-cut. China, the world’s largest oil importer, is grappling with economic headwinds that could dampen its oil consumption. Weak consumer spending, a persistent real estate slump, and high youth unemployment are raising doubts about China’s ability to achieve its stated 5% economic growth target for the year.

In contrast, the United States is entering its peak summer driving season, providing a boost to oil demand. Expectations of rising gasoline consumption and declining oil and fuel stockpiles in the world’s largest economy are offering support to prices.

Economic Factors

Traders are closely monitoring U.S. economic indicators, particularly inflation data. The upcoming release of the personal consumption expenditures index, the Federal Reserve’s preferred inflation measure, will be crucial in shaping market sentiment. The Fed’s stance on interest rates, as indicated by San Francisco Fed President Mary Daly, suggests a cautious approach to rate cuts. This could potentially limit economic growth and oil demand if higher borrowing costs persist for an extended period.

Inventory and Market Structure

U.S. crude oil inventories are expected to have decreased by 3 million barrels in the week to June 21, with gasoline stocks also likely declining. These inventory draws, if confirmed, would lend support to the bullish case for oil prices.

The market structure is showing signs of tightening, with front-month Brent prices potentially pushing into the upper $80s in the short term. The market’s backwardation – where front-month prices are higher than future months – incentivizes immediate consumption rather than storage, further supporting near-term prices.

Short-term outlook: Bullish.

Despite concerns about China’s economic recovery, the combination of geopolitical supply risks, expected strong U.S. summer demand, and tightening inventories paints a positive picture for oil prices in the near term. However, economic uncertainties and potential demand destruction from persistently high prices could cap significant upside movements. Traders should remain alert to geopolitical developments and key economic data releases that could quickly shift market sentiment.

Technical Analysis

Light crude oil futures are struggling for a fourth straight session early Tuesday. The market is trading on the strong side of both the 50-day moving average at $78.88 and the 200-day moving average at $77.76 so the bias is to the upside. However, upside momentum has slowed due to the steep, nearly monthlong rally.

Our work suggests the market could continue to grind higher over the near-term into $83.57. However, there are some downside risks. A break under $80.23 could trigger a further decline into a support zone formed by the moving averages at $78.88 to $77.76.

The price action also suggests the market is waiting for the next catalyst after exhausting the geopolitical risks and summer demand narrative.