Investing.com– Oil prices steadied in Asian trading Tuesday after rising sharply in recent sessions as traders bet on increased demand during the Independence Day holiday and potential supply risks from geopolitics and weather disruptions.
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Crude markets have largely shrugged off concerns over mixed economic data from China and signs that U.S. fuel demand has not recovered as strongly as markets had hoped. The dollar’s resilience ahead of fresh interest rate signals this week also did little to slow crude’s rally.
The expiring in September rose 0.2% to $86.78 a barrel, while rose 0.2% to $82.48 a barrel at 21:01 ET (01:01 GMT).
Independence Day week to see increased travel
The recent rise in crude has been largely fueled by hopes of a recovery in U.S. fuel demand ahead of the busy summer travel season.
The American Automobile Association predicts a record number of people will travel by car this week, due to the Independence Day holiday.
“We expect the week of July 4 to be our busiest ever, with 5.7 million more people traveling than in 2019,” AAA said in a recent statement.
Increased travel during the summer season bodes well for fuel demand, although a recent and sustained increase in U.S. fuel inventories has raised questions about the magnitude of this trend.
Middle East, supply risks linked to hurricanes
In recent sessions, heightened fears of an all-out war in the Middle East have been a major supporting factor for crude oil, with tensions between Israel and Hezbollah over Gaza showing little sign of easing.
Traders have attached a higher risk premium to crude because of the conflict, betting that supplies from the Middle East would be disrupted by a bigger war. Continued clashes between Russia and Ukraine, with the latter targeting Moscow’s oil infrastructure, have also weighed on crude’s risk premium.
Additionally, potential supply disruptions from Hurricane Beryl in the United States have also raised the prospect of tighter crude markets. Hurricane Beryl is headed toward Mexico and could disrupt offshore oil production along its path.
The prospect of tighter supply also comes as the Organization of the Petroleum Exporting Countries has maintained its current production cut schedule, which analysts say will significantly tighten crude markets through the end of 2024.
