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Oil inches higher on summer demand outlook

Oil rigs on platforms in Gaoyu Lake in east China’s Jiangsu province Friday, Sept. 17, 2021.

Barcroft Media | Getty Images

Oil prices edged up in early trade on Monday, supported by forecasts of a supply deficit stemming from peak summer fuel consumption and OPEC+ cuts in the third quarter, although global economic headwinds and rising non-OPEC+ output capped gains.

Brent crude futures rose 16 cents, or 0.2%, to $85.16 a barrel by 0032 GMT, while U.S. West Texas Intermediate crude futures were at $81.71 a barrel, up 17 cents, or 0.2%.

Both contracts gained around 6% in June, with Brent has settling above $85 a barrel in the past two weeks, after the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, extended most of its deep oil output cuts well into 2025.

That led analysts to forecast supply deficits in the third quarter as transportation and air-conditioning demand during summer draw down fuel stockpiles.

Hopes of an interest rate cut by the U.S. Federal Reserve and rising geopolitical concerns in Europe and between Israel and Lebanon’s Hezbollah have also kept a floor under prices, IG analyst Tony Sycamore said in a note.

WTI’s recent rally may extend towards $85 a barrel if prices remain above the 200-day moving average at $79.52, he said.

In the U.S., oil production and demand rose to a four-month high in April, according to the Energy Information Administration’s (EIA) Petroleum Supply Monthly report published on Friday.

Traders are watching out for the impact from hurricanes on oil and gas production and consumption in the Americas.

The Atlantic hurricane season started with Hurricane Beryl on Sunday. Beryl, the earliest Category 4 hurricane on record, headed toward the Caribbean’s Windward Islands where it is expected to bring life-threatening winds and flash flooding on Monday, the U.S. National Hurricane Center said.

In China, the latest manufacturing data did not bode well for oil demand in the world’s no.2 consumer and top crude importer.

China’s manufacturing activity fell for a second month in June while services activity slipped to a five-month low, an official survey showed on Sunday, keeping alive calls for further stimulus as the economy struggles to get back on its feet.

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