On Monday (June 24), oil prices rose about 1% driven by the strong driving demand in the summer, concerns over supply triggered by the tense situation in the Middle East and the drone attack on Russian refineries. At the same time, a weakening US dollar further boosted the price of crude oil.

WTI crude oil futures settlement price rose 1.11%, closing at $81.63 per barrel. As of the time of publication, it is currently at $81.69 per barrel, up 1.18%.

(West Texas Intermediate (WTI) crude oil futures chart, source: FX168)

Brent crude oil futures in August closed at $86.01 per barrel, up $0.77 per barrel, a 0.9% increase. As of the time of publication, it is currently at $85.22 per barrel, up 1.05%.

(Brent crude oil futures chart, source: FX168)

[Market News Analysis]

Last week, both benchmark indices rose by about 3%, the second consecutive week of gains.

Expectations of rising demand for summer cooling and travel fuel may further support WTI prices. JPMorgan's report stated that due to strong summer travel demand in Europe and Asia, global oil demand increased by 1.4 million barrels per day in June.

Tamas Varga of oil broker PVM commented on the seasonal demand for oil products, "The main fundamental reason for the rise in oil prices is...people are increasingly convinced that global oil inventories in the northern hemisphere will inevitably drop significantly in the summer."

Bob Yawger, head of energy futures at Mizuho Securities in New York, said that after a sharp drop in US crude and gasoline inventories last week, traders are waiting for the report to be released on Wednesday to provide further evidence of strong gasoline demand. "This positive situation must continue in order to continue in the market." He added that the growing electric vehicle market is eroding gasoline's share in the transportation market.

Jim Ritterbusch of Ritterbusch and Associates said that as inflation erodes summer travel spending, the rise in gasoline may slowly weaken in the coming weeks. "We still expect demand to plummet next month, especially since recent retail price increases have further restricted vacation plans."

Geopolitical risks in the Middle East and an increase in the frequency of drone attacks on Russian refineries in Ukraine also supported oil prices.

On Monday, EU countries reached a new round of sanctions on Russia's war in Ukraine, including banning the transfer of Russian liquefied natural gas (LNG) within the EU to third countries.

At the same time, a weakening US dollar made commodities (such as oil) priced in dollars more attractive to buyers using other currencies. The US dollar index, which measures the performance of the dollar against six major currencies, rose on Friday and fell slightly on Monday. Earlier data showed that US business activity reached a 26-month high in June.

However, Fed officials have indicated that the Fed needs to see more progress on inflation issues before considering interest rate cuts. The continued rise in US interest rates is dragging down WTI prices as it increases borrowing costs and may restrain economic activity and oil demand.

Ecuador's national oil company, Ecuador Petroleum Corporation, has declared that exports of Napo heavy crude oil have been affected by force majeure due to pipeline and oil well shutdowns caused by heavy rains.

Goldman Sachs analysts said that due to the peak demand still being ten years away, the global oil market may fall into supply shortage. The investment bank estimates that global oil demand will continue to rise over the next 10 years, and crude oil demand will peak at 110 million barrels per day in 2034. Analysts said that this is due to increased demand for Asian oil and petrochemical products. The bank added that the rise in demand may cause a supply shortage, especially if companies continue to reduce capital expenditures. A survey conducted by Oil and Gas Journal shows that the six major oil producers, including ExxonMobil and Chevron, are expected to cut spending by $3.8 billion this year.

Goldman Sachs Managing Director Nikhil Bhandari and analyst Amber Cai said in a recent report: "We believe that it will take another decade for oil demand to peak, more importantly, after reaching its peak ten years later, demand will remain stable in the coming years, rather than declining sharply." They later added: "Although it will take another decade for oil demand to peak, capital for the production of crude oil and oil products is slowing, which will limit mid-term supplies."

TD Securities' commodity strategist pointed out that with the escalating tension between Israel and Lebanon in the Middle East region, as well as further ship attacks in the Red Sea, crude oil supply risks have once again become a focus of attention. "At this moment, after the sell-off caused by OPEC+, algorithmic funds inflow has provided support to the market, and firm price actions have allowed commodity trading advisors (CTAs) to restart bidding for WTI crude oil." "Our energy supply risk indicators have once again soared and can further support price trends in the short term, however, the threshold for continuing algorithmic flow operation is getting higher and higher." "We still believe that as CTA buying flow gradually decreases, the upward momentum may begin to fade. In fact, prices below $81.92 per barrel will stop WTI purchases, and prices slightly below $81 per barrel will lead to fund liquidation of long positions."

Worth noting in the data, the U.S. Commodity Futures Trading Commission (CFTC) data showed that as of the week of June 18th, speculative net long positions for WTI crude oil futures decreased by 1,050 contracts to 159,837 contracts.