With the ‘summer driving’ season set to officially kick off on Memorial Day holiday, U.S. crude futures are peaking. However the international benchmark Brent crude futures prices have largely remained unaffected by this localised event.
With a strong start to the summer driving season in the U.S., the price of U.S. crude touched $50 a barrel on Tuesday, suggesting that the demand for fuel is likely to be strong in the coming months.
Demand for gasoline in the U.S. is likely to rise significantly in the wake of consumers using the fuel to visit friends and family during the summer month. The summer driving season will officially kick-off on the Memorial Day holiday which is at the start of this week.
On Tuesday U.S. West Texas Intermediate crude futures CLc1 rose beyond $50 per barrel in early trading, and were at $494.97 per barrel at 0032 GMT.
“The start of the U.S. driving season … boosted confidence in the market that stockpiles would start to fall in coming weeks,” said ANZ bank.
As per the American Automobile Association (AAA), 39.3 million Americans are expected to travel 50 miles (80 km) or more over the Memorial Day weekend.
“That is 1 million more travelers than last year taking to the roads, skies, rails and water, creating the highest Memorial Day travel volume since 2005,” said the AAA.
The international prices of Brent crude futures were unaffected by this holiday travel in the U.S. since no such driving is taking place in either Europe or Asia.
Brent crude futures LCOc1 were seen trading at $52.26 a barrel, up by 3 cents from their last close position.
For Brent, the prime factor for its upward swing will be if Organization of the Petroleum Exporting Countries (OPEC) decides to extend its pledge to cut production by another 1.8 million barrels per day (bpd).
If OPEC’s production cuts are maintained till the end of the first quarter of 2018, it is likely to significantly reduce the glut in the global oil pool.
The initial agreement, which has been in place since January, is set to expire this June.
So far production cuts have not had their desired effect of significantly reducing excess inventory levels.