Investing.com–Oil prices settled lower on Tuesday after falling from a two-month high despite expectations of increased demand during Independence Day and potential supply risks from geopolitical and weather-related disruptions.
At 2:30 PM ET (18:30 GMT), the price was down 0.4% at $86.24 per barrel, while the stock was down 0.7% at $82.81 per barrel.
Both benchmarks rose about 2% in the previous session, climbing to their highest levels since late April.
Independence Day week to see more trips
The recent rise in crude oil has been driven largely by hopes that US fuel demand will pick up with the start of the high-travel summer season.
The American Automobile Association predicts a record number of people will travel by car in the coming week for the Independence Day holiday.
“We expect this Fourth of July week to be our busiest on record, with 5.7 million additional people traveling compared to 2019,” AAA said in a recent statement.
Increased travel during the summer season bodes well for fuel demand, although a recent sustained increase in U.S. fuel inventories raised questions about how much of a role this trend was playing.
In the Middle East there are major risks in terms of hurricane landfall
A key support for crude in recent sessions has been increased concern about all-out war in the Middle East, as tensions between Israel and Hezbollah over Gaza showed little sign of easing.
Traders have placed a higher risk premium on crude oil because of the conflict, banking on a bigger war disrupting supplies from the Middle East. Ongoing clashes between Russia and Ukraine, with the latter targeting Moscow’s oil infrastructure, also played a role in the crude oil risk premium.
In addition, potential supply disruptions due to Hurricane Beryl in the Caribbean Sea also raised the prospect of tighter crude oil markets. Beryl was seen heading to Mexico and could disrupt offshore oil production along the way.
The prospect of tighter supply also comes as the Organization of the Petroleum Exporting Countries has continued its current course of production cuts, which analysts expect will tighten crude markets significantly through the remainder of 2024.
Forecast of API crude oil stocks to be announced soon
Later in the session, the latest data on US crude oil inventories from industry body American Petroleum Institute will also be discussed.
Analysts expect a small drop in crude inventories, indicating demand is increasing, but were disappointed by a big increase last week. The data comes ahead of Wednesday’s release of the Energy Information Administration’s petroleum report.
“We expect a general decline in product prices this week,” Macquarie said in a Monday note, forecasting distillate inventories to take the lead with a decline of 2.3 million barrels, followed by a decline in gasoline inventories of 1.2 million barrels.
(Peter Nurse, Ambar Warrick contributed to this article.)
