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.
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.