As fuel demand is anticipated, oil prices rise, and the US dollar weakens

Due to worries about supply due to drone attacks on Russian facilities and the possibility of a robust summer boosting demand, oil prices increased by roughly 1% on Monday.

A weakening US currency contributed to the strength of the crude price.

August delivery Brent futures closed at $86.01 per barrel, up 77 cents or 0.9%. US crude gained 90 cents, or 1.1%, to settle at $81.63 per barrel.

Last week saw a 3% gain for both benchmarks, marking their second straight weekly increase.

Relating to seasonal demand for oil products, “the chief underlying reason behind the price strength… is the growing confidence that global oil inventories will inevitably plunge during the summer in the northern hemisphere,” stated Tamas Varga of oil broker PVM.

According to Bob Yawger, director of energy futures at Mizuho in New York, traders are waiting to see whether the report that is expected on Wednesday will provide further evidence of continuing high gasoline demand following last week’s significant fall in U.S. crude and gasoline stockpiles.

Yawger added that the market share of gasoline is being eaten up by the expanding electric vehicle sector. “It has to sustain for this positive narrative to continue in the market,” Yawger said.

As inflation reduces summer travel expenditure, the gasoline-driven rally may tail off in the upcoming weeks, according to Jim Ritterbusch of Ritterbusch and Associates. “We still expect a significant falloff in demand next month especially with the recent uplift in retail pricing further curtailing vacation plans,” Ritterbusch stated.

Oil prices were also supported by geopolitical uncertainties in the Middle East and an increase in drone assaults by the Ukrainians on Russian refineries.

A new set of sanctions against Russia for its war in Ukraine was approved by the EU on Monday. Among the measures is a ban on reloading Russian LNG in the EU for subsequent export to other nations.

The dollar’s depreciation increased the appeal of dollar-denominated goods like oil to foreign exchange buyers.

After the Japanese currency bounced around the 160 per dollar mark, traders were back on high alert, and the dollar dropped from a nearly eight-week high.

The dollar index, which gauges performance against six major currencies, increased on Friday and continued to rise modestly on Monday following data that indicated June saw a 26-month high for U.S. business activity.

According to sources on Friday, Ecuador’s state oil company Petroecuador has declared force majeure on Napo heavy crude export deliveries following the closure of a pipeline and oil wells due to excessive rain.