Market Analysis

Oil prices remained relatively stable on Tuesday following a previous session of gains driven by anticipated increased fuel demand this summer, while investors exercised caution ahead of the upcoming U.S. consumer price data release.

As of 0640 GMT, Brent futures for August delivery had slipped by 5 cents to $85.96 a barrel, following a 0.9% rise on Monday. U.S. crude futures decreased by 3 cents to $81.60 a barrel, after a 1.1% climb the day before. Both benchmarks recorded approximately 3% gains last week, continuing a two-week streak of increases.

The demand for gasoline is rising, and oil and fuel stockpiles have decreased as the United States, the world's largest oil consumer, enters its peak summer consumption period. Preliminary data from a Reuters poll on Monday suggested U.S. crude oil stockpiles likely fell by 3 million barrels in the week ending June 21. Gasoline stocks were also expected to have declined, while distillate inventories likely saw an increase.

"The recent surge in oil prices was driven by an optimistic demand outlook and reduced U.S. inventories. With the Northern Hemisphere entering a hot summer and the upcoming hurricane season, demand is anticipated to continue rising in the coming months," noted independent market analyst Tina Teng.

Despite this, investors remain cautious about potential further increases in oil prices due to concerns that high interest rates might restrain fuel consumption by slowing economic growth.

The upcoming release of the personal consumption expenditures index, the Federal Reserve's preferred measure of inflation, on Friday is expected to provide further insights into the outlook for interest rates. Delays in rate cuts could maintain higher borrowing costs for an extended period.

Oil prices were also bolstered by ongoing Ukrainian attacks on Russian oil infrastructure, which could disrupt crude and fuel supplies. On June 21, Ukrainian drones targeted four refineries, including the Ilsky refinery, a major fuel producer in southern Russia.

The European Union has imposed a new package of sanctions against Russia due to its war in Ukraine, which includes adding 27 vessels, including those operated by Russian state-owned shipping firm Sovcomflot, to its list of sanctioned entities.

Adding to market uncertainties, the upcoming elections in Iran later this week have heightened tensions. According to ANZ Research analysts, the potential election of a more hard-line president could lead to increased confrontations with the U.S., Israel, and Saudi Arabia.

Paraphrasing text from "Reuters" all rights reserved by the original author.