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Oil Prices Move Higher as All Eyes Turn to OPEC+

Crude oil prices started this week by moving slightly following after a week when they booked the sharpest drop in a month on interest rate woes.

The week is set to be dominated by the start of driving season in the United States and the OPEC+ policy meeting on Sunday. The first will provide a glimpse into oil demand trends in the world’s biggest consumer while the second will likely confirm the production cuts that the extended oil cartel is expected to roll over into the second half of the year.

For now, expectations are for a strong start to this year’s driving season. The American Automobile Association expects air travel over the long weekend to reach the highest in close to two decades. ANZ analysts were more cautious, pointing to EV sales as potentially undermining oil demand growth despite a strong driving season.

"While U.S. holiday trips are expected to hit a post-COVID high, improved fuel efficiency and EVs could see oil demand remain soft," the analysts said, as quoted by Reuters.

“Based on current market expectations that OPEC+ is likely to extend cuts, oil’s risks are skewed to the upside,” one Chinese market analyst from Qisheng Futures Co. told Bloomberg.

That expectation of extended production cuts by OPEC+ helped prices steady and may continue supporting them throughout the week—but not necessarily.

“However, the trajectory of price action will be significantly influenced by the U.S. Producer Price Index (PPI) data scheduled for the week, which will in turn shape the Federal Reserve's approach to potential rate adjustments,” Reuters quoted a Delhi-based SS WealthStreet analyst as saying.

Meanwhile, Goldman Sachs made an upward revision to its long-term oil demand forecast, now seeing demand in 2030 at 108.5 million barrels daily, up from an earlier prediction of 106 million bpd. The bank expects demand for crude to peak in 2034 at 110 million bpd and plateau until 2040.

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By Irina Slav for Oilprice.com

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