May 29 (Reuters) – Oil prices increased on Wednesday due to expectations that major producers will maintain production cuts during their meeting this Sunday, coinciding with the start of the peak summer demand season which should boost fuel consumption.
Brent crude futures for July delivery rose by 27 cents, or 0.3%, to $84.49 per barrel at 0042 GMT. U.S. West Texas Intermediate futures for July climbed by 35 cents, or 0.4%, to $80.18.
Traders and analysts anticipate that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, will uphold voluntary production cuts totaling about 2.2 million barrels per day.
The Memorial Day holiday on Monday marks the beginning of the peak demand season in the U.S., the world’s largest oil consumer. Maintaining production cuts is expected to support prices as consumption increases.
“Initial data suggest a relatively high number of U.S. holiday trips have been taken over the Memorial Day holiday, the traditional start of the driving season. Air travel has also been strong,” noted Daniel Hynes, senior commodity strategist at ANZ Bank.
Increased fighting in the Gaza Strip, with Israeli tanks advancing into the Rafah section, also supported prices amid concerns about the conflict potentially spreading to the greater Middle East, a key supply region.
Investors are also awaiting U.S. crude inventory data from the American Petroleum Institute, delayed by a day due to the Memorial Day holiday. Preliminary Reuters polls suggest U.S. crude oil stockpiles fell by about 1.9 million barrels last week.
Additionally, investors are closely monitoring U.S. inflation data expected this week, which could influence expectations for Federal Reserve interest rate cuts, potentially benefiting oil prices. The U.S. core Personal Consumption Expenditures Price Index report for April, the Fed’s preferred inflation measure, is due later this week and is expected to remain steady on a monthly basis.
Expectations for the timing of rate cuts have fluctuated, with policymakers cautious as data still indicates persistent inflation. (Reporting by Arathy Somasekhar in Houston; Editing by Christian Schmollinger)
