Since June 4, oil prices have continued to rise. As of July 7, the price increases of WTI crude oil (USO.US) and Brent crude oil (BNO.US) were as high as 13%. On July 8, oil prices fell slightly and the trend was weak.

Source: uSMART SG

The peak season for tourism driving has arrived, pushing up oil prices

According to data from the American Automobile Association, from June 29 to July 7, about 60.6 million Americans are expected to drive 50 miles (about 80 kilometers) or more, an increase of 4.8% over the same period last year. At the same time, 5.74 million people are expected to travel by plane, an increase of 6.9% year-on-year. Another 4.62 million people are expected to travel by other means. This also means that during the Independence Day holiday in early July, a record 71 million Americans will travel. The expectation of good travel demand has led to a rapid rise in oil prices.

Will the arrival of hurricanes help push oil prices to continue to rise?

On Wednesday, July 3, the National Hurricane Center (NHC) of the National Oceanic and Atmospheric Administration (NOAA) announced that Hurricane Beryl was downgraded from Category 5 to Category 4 on Wednesday morning. According to the NHC standards, Category 4 and Category 5 hurricanes correspond to maximum wind speeds of 131 to 155 mph and above 156 mph, respectively.

Beryl was the earliest hurricane on record to strengthen to Category 5. It swept across the southeastern Caribbean, hit the Yucatan Peninsula in the Caribbean, and then posed a threat to key energy infrastructure such as U.S. oil along the Gulf Coast.

The NHC said Beryl's wind speed reached a maximum of 157 mph before weakening to 145 mph on Wednesday morning local time in the United States. Government weather forecasters expect Beryl to "weaken somewhat" in the "next day or two," but it will still be a "major hurricane" because it will "strike Jamaica and the Cayman Islands on Wednesday."

Before the NHC announced that Beryl's winds had weakened, energy giant Shell announced on Wednesday that it would suspend some of its drilling operations in the Gulf of Mexico. As a precaution, the company began to evacuate non-essential personnel. Some of the products affected by the suspension of operations include HOOPS Blend, a medium-acid oil produced by the Perdido platform operated by Shell, the oil produced by the Perdido platform transported to the Quintana terminal south of Freeport, Texas by the offshore oil pipeline system HOOPS, and the crude oil sent through Quintana and flowing into the Houston refining center.

In fact, last month, the financial blog Zerohedge wrote an article warning that because this year's Atlantic hurricane season threatens refining, the La Nina phenomenon will make the Biden administration face a more complicated situation before the US election. Tropical storms in the hurricane season may subvert the US refining business in the Gulf of Mexico. It only takes one strong hurricane to destroy large US refineries along the Gulf of Mexico coast and may cause the average gasoline price in the United States to rise to the politically sensitive level of $4 per gallon. The average gasoline price announced by the American Automobile Association AAA is now slightly higher than $3.5 per gallon.

Geopolitical tensions raise concerns about crude oil supply

The latest report released by ANZ Bank last Tuesday showed that Brent crude oil prices, which are the international oil price standard, have climbed to more than $86 per barrel, driven by increasing supply constraints.

In fact, as of July 4, Brent crude oil prices reached $87.05 per barrel, and the bank emphasized that as tensions in the Middle East increase, the market price includes a premium for geopolitical risks.

Saudi Arabia's export figures reportedly fell to 5.61 million barrels per day in June. Despite this, production from the Organization of Petroleum Exporting Countries OPEC and its partners remained stable at about 27 million barrels per day this month. ANZ Bank's analysis shows that the group continues to focus on stabilizing the oil market, which provides additional support for oil prices.

Follow us

Find us on Twitter, Instagram, YouTube, and TikTok for frequent updates on all things investing.

Have a financial topic you would like to discuss? Head over to the uSMART Community to share your thoughts and insights about the market! Click the picture below to download and explore uSMART app！

Important Notice and Disclaimer:

This document is prepared by uSMART. This document is not intended for or directed at persons under local laws or regulations that prohibit the distribution or publication of this document. This document is provided to the recipient only, and the information, materials, or analytical tools contained herein are provided to the recipient for informational and reference purposes only. This document should not be construed in any jurisdiction as constituting an offer, solicitation, recommendation, inducement, endorsement, opinion, or guarantee to purchase, sell, or trade any securities, financial products, or instruments or to engage in any investment or any transaction of any kind, nor is there any intention to solicit or invite the purchase or sale of any securities.

Investment involves risks. Before making investment decisions, the recipient should carefully read relevant offering documents to obtain further information, including risk factors. Past performance data does not imply similar future performance. Investments in the asset categories mentioned in this document may not be suitable for all recipients. This document does not consider the individual objectives, financial situation, or needs of any specific person who may access this document. Before engaging in any transactions, the recipient should take reasonable actions based on personal objectives and circumstances to ensure a clear understanding of the transaction and independently evaluate the suitability of the transaction, including assessing the potential risks and returns of the transaction, and if necessary, seek independent professional advice. The information and opinions contained in this document reflect the judgment of uSMART as of its publication date, and no further notice will be given in the event of changes. Neither we or our respective directors, officers or employees will be responsible for any losses or damages which any person may suffer or incur as a result of relying upon anything stated or omitted from this article.

The value of these securities and the income from them may fall or rise. Your investment is subject to investment risk, including loss of income and capital invested. Past performance figures as well as any projection or forecast used in this article is not indicative of its future performance.

This advertisement has not been reviewed by the Monetary Authority of Singapore.