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Oil up on OPEC+ meeting, summer driving season and weaker US dollar

Published 2024/05/28, 03:04
Updated 2024/05/28, 21:30
© Reuters. FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo

By Laila Kearney

NEW YORK (Reuters) -Oil prices gained more than $1 a barrel on Tuesday on the expectation that OPEC+ will maintain crude supply curbs at its June 2 meeting, while the start of U.S. summer driving season and a weaker dollar also boosted the commodity.

Brent crude futures for July delivery settled up $1.12, or 1.4% at $84.22 a barrel. U.S. crude ended at $79.83 a barrel, gaining $2.11, or 2.7% from Friday's close, having traded through Monday's U.S. mark Memorial Day holiday without a settlement.

For the online meeting of OPEC+ oil producers coming up on Sunday, traders and analysts are predicting 2.2 million barrels per day of voluntary production cuts to stay in place.

"We expect OPEC+ to extend the current cut for at least another three months at its upcoming meeting," UBS analysts said in a note.

"This week's upside follow through is being facilitated by a significant weakening in the dollar and a growing consensus that OPEC+ will extend production cuts at the upcoming weekend meeting," said Jim Ritterbusch of Ritterbusch and Associates.

The dollar slipped 0.1% to a more than one-week low. [USD/]

Oil extended a more than 1% rise in trade on Monday that was muted due to the holiday, with hopes of a demand boost from the first tradable day since the start of the U.S. summer driving and vacation season providing support.

Worries over U.S. interest rates remaining elevated for a longer period contributed to a weekly loss for crude last week. Higher rates boost the cost of borrowing, which can dampen economic activity and demand for oil.

Investors will watch the U.S. core personal consumption expenditures price index (PCE), which is a main inflation gauge for the Federal Reserve, due on Friday.

"Despite the indisputably brighter mood seen in the last two days, interest rate concerns will most plausibly act as a (brake) on further attempts to send oil prices meaningfully higher in the immediate future," said Tamas Varga of broker PVM.

© Reuters. FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo

Air travel data also helped to buoy oil prices, with U.S. seat numbers on domestic flights for May rose by 5% month on month and almost 6% year on year to slightly above 90 million, data from flight analytics company OAG showed, surpassing 2019 levels.

Continuing conflict in the Middle East, which on Monday included the death of a Egyptian security service member in an exchange of gunfire with Israeli forces, also helped boost oil prices, said Bob Yawger of Mizuho bank.

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