Strong start to summer driving season pushes US oil towards $50
(Reuters)—US crude oil prices rose towards $50/bbl on Tuesday as a strong start to the summer driving season in the US suggested strong fuel demand in months ahead.
US demand for transport fuels, such as gasoline used in cars and diesel in buses, tends to rise significantly as families visit friends and relatives or go on vacation during the summer months, with the so-called summer driving season officially kicking off on the Memorial Day holiday at the start of this week.
US West Texas Intermediate (WTI) crude futures climbed above $50/bbl in early trading on Tuesday.
The American Automobile Association (AAA) said ahead of Memorial Day that it expected 39.3 MM Americans to travel 50 mi (80 km) or more away from home over the Memorial Day weekend.
"That is 1 MM more travellers than last year taking to the roads, skies, rails and water, creating the highest Memorial Day travel volume since 2005," the AAA said.
With no such driving taking place in Asia or Europe at this stage, international benchmark Brent crude futures prices were not pushed up as strongly.
Brent crude futures were at $52.26 per barrel, up $0.03 from their last close.
The main price factor for Brent is whether a decision led by the Organization of the Petroleum Exporting Countries (OPEC) to extend a pledge to cut production by around 1.8 MMbpd until the end of 1Q 2018 will have the desired effect of significantly tightening the market to end years of oversupply.
An initial agreement, which has been in place since January, would have expired in June this year, and the production cutback has so far not had the desired effect of substantially drawing down excess inventories.
(Reporting by Henning Gloystein; Editing by Joseph Radford)
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