Oil prices rose on Monday, buoyed by expectations of increasing fuel demand during the summer driving season. Brent crude futures gained 53 cents, or 0.7%, to $80.15 per barrel, while U.S. West Texas Intermediate crude futures were up 57 cents, or 0.8%, at $76.10.
Goldman Sachs analysts predict Brent will rise to $86 per barrel in the third quarter, citing solid summer transportation demand that will push the oil market into a deficit of 1.3 million barrels per day (bpd). Energy consultancy FGE also expects oil prices to reach the mid-$80s in the third quarter.
The optimism about summer demand was tempered by a strengthening of the U.S. dollar, which makes dollar-denominated commodities like oil more expensive for holders of other currencies. The dollar rallied after Friday’s U.S. jobs data prompted investors to trim expectations for interest rate cuts.
Last week, oil prices posted a third straight weekly loss due to concerns that the planned unwinding of some production cuts by OPEC+ from October will add to rising supply. Despite the OPEC+ cuts, oil inventories have risen, with U.S. crude stocks and gasoline stocks increasing in the latest week.
Tamas Varga of oil broker PVM said that “investors on the other side of the Atlantic clearly dismiss the Euro weakness and the resultant dollar strength due to French snap elections.”
Overall, the market is anticipating tighter supply and higher prices in the coming months, but the strong dollar continues to be a headwind for oil.