Oil prices jumped on Tuesday, settling up about 2%, boosted by a falling U.S. dollar, hopes for higher demand in the developing world and supply cuts by the world’s biggest oil exporters.
Brent futures rose $1.71, or 2.2%, to settle at $79.40 a barrel. U.S. West Texas Intermediate (WTI) crude rose $1.84, or 2.5%, to settle at $74.83.
Brent’s settlement was its highest since April 28 and WTI’s since May 1. Brent was in technically overbought territory for the second time in three days.
“The break of the recent high could be viewed as a bullish step that could give (Brent) the momentum to break back above $80,” said Craig Erlam, a senior market analyst at OANDA. “The rally still has momentum at this stage,” he added.
U.S. diesel futures were also on track for their highest close since April 18.
The U.S. dollar (.DXY) dropped to a two-month low against a basket of other currencies a day after several Federal Reserve officials signaled the U.S. central bank was near the end of its tightening cycle.
A weaker dollar makes crude cheaper for holders of other currencies.
U.S. small business confidence climbed to a seven-month high in June as pessimism about the economic outlook diminished sharply and sales expectations improved, but a still-tight labor market continued to drive concerns about inflation.
Markets were awaiting U.S. inflation data on Wednesday for clues on the interest rate outlook. Higher rates can slow economic growth and reduce oil demand.
The International Energy Agency (IEA) said the oil market should remain tight in the second half of 2023, citing strong demand from China and developing countries combined with recently announced supply cuts, including by top exporters Saudi Arabia and Russia.
The IEA will publish new forecasts this week.
The secretary general of the Organization of the Petroleum Exporting Countries (OPEC) said global energy demand is forecast to rise 23% by the end of 2045.
RECORD WORLD OIL SUPPLY AND DEMAND
The U.S. Energy Information Administration (EIA) projected global oil output would rise from 99.9 million barrels per day (bpd) in 2022 to 101.1 million bpd in 2023 and 102.6 million bpd in 2024, while world demand will rise from 99.4 million bpd in 2022 to 101.2 million bpd in 2023 and 102.8 million bpd in 2024.
That compares with a record 100.5 million bpd of global oil production in 2018 and a record 100.8 million bpd of world liquids consumption in 2019.
EIA also projected U.S. crude output would rise from 11.9 million bpd in 2022 to 12.6 million bpd in 2023 and 12.9 million bpd in 2024, while U.S. liquids consumption would rise from 20.3 million bpd in 2022 to 20.4 million bpd in 2023 and 20.8 million bpd in 2024.
That compares with a record 12.3 million bpd of U.S. crude production in 2019 and a record 20.8 million bpd of liquids consumption in 2005.
The market is awaiting U.S. oil inventory data from the American Petroleum Institute (API), an industry group, on Tuesday and the EIA on Wednesday.
With analysts in a Reuters poll forecasting a 0.5-million barrel increase in U.S. crude stocks during the week ended July 7, that inventory data could weigh on oil markets.
If correct, it would be the first crude stock build in four weeks and compares with an increase of 3.3 million barrels in the same week last year and a five-year (2018-2022) average decrease of 6.9 million barrels.