Oil prices near two-month high amid hurricane beryl threat

July 05, 2024 (MLN): Oil prices traded near a two-month high amid looming threat of Hurricane Beryl, which suggested a potentially more severe storm season.

Brent crude traded near $87.12 per barrel. It is up 2.5% this week.

While West Texas Intermediate crude (WTI) was at $83.67 per barrel.

Both benchmarks are headed for a fourth weekly advance.

The risk of Hurricane Beryl to production in the Gulf of Mexico has tapered, but its early appearance highlighted concerns of a “supercharged” season, as Bloomberg reported.

Meanwhile, the biggest drop in US stockpiles in almost a year signaled tightening supplies.

Crude has been on a slow and steady grind higher since the beginning of June partly due to a positive outlook for demand over the northern hemisphere summer, with bullish, backwardated timespreads signaling healthy near-term consumption.

Signs of softer demand in Asia have tempered that optimism, and led Saudi Aramco to slash prices of its crude to the region for a second month.

Traders will be watching for data on US employment later on Friday, which may inform the outlook for monetary policy. That’ll also impact the dollar, which has weakened this week to make commodities priced in the currency cheaper for international investors.

Geopolitical risks are also salient, including elections in France and concerns over US President Joe Biden’s performance in his debate with Donald Trump.

The situation in the Middle East also remains volatile, with signs of progress in truce talks between Hamas and Israel but a worsening of the conflict with Iran-backed Hezbollah.

“There are promising signs of a gradual increase in summer travel, boosting oil demand in the US,” said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova Pte.

In the Middle East, “tensions show little signs of de-escalating,” so the current risk premium is likely to remain in place, she said.

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