Let's start with some basic information about this commodity. WTI crude oil is extracted mainly in Texas in the United States, while Brent crude oil is extracted from oil fields in the North Sea. Although WTI has a lower sulphur content than Brent crude oil, its price is generally lower than that of Brent. This is because Brent's main source of supply, the North Sea oil fields, are expected to be depleted in the long term, while North America is seeing increased production of WTI oil from shale and oil sands. Crude oil futures contracts are traded on commodity exchanges, with Brent crude oil traded on the Intercontinental Exchange (ICE) and WTI on the New York Mercantile Exchange (NYMEX).

Oil prices rose slightly in Asian trading at the start of the week, supported by a weaker dollar, as investors were cautious ahead of upcoming central bank interest rate decisions and the announcement of key economic indicators. Recent gains in oil markets were driven by a weak dollar and optimism that Chinese consumption will support a recovery in demand, especially as Chinese tourism rebounded ahead of the May Day holiday, but remained below pre-crisis levels. *

Brent crude oil futures rose 0.4% and West Texas Intermediate crude oil futures rose 0.3%.* This week, the focus is on US GDP data for Q1 2023 and upcoming central bank meetings in Japan, the UK, and the Eurozone. Markets are uncertain when the Fed will pause its rate hike cycle and whether it will cut interest rates this year, while the ECB and BoE are expected to raise rates further.

 Crude Oil WTI Futures performance over the past 5 years. (Source: Investing)*

Performance of Brent Oil Futures over the past 5 years. (Source: Investing)*

Investors are considering a potential surge in fuel demand due to holiday travel in China. Holiday travel in China could boost fuel demand. Despite a rebound in travel to Asian countries, the number of flights remains low and investors are cautious. Although there are concerns about slowing oil demand growth in China, experts expect oil prices to recover in the coming months due to OPEC+ price cuts and increasing oil demand growth from China.[1]

And what is the situation in the US? At the end of March, President Biden announced that he would release one million barrels of oil every day for 180 days from the Strategic Petroleum Reserve. He accomplished this by using all exemptions approved by Congress during that 180-day period, except for those listed in the Infrastructure and Jobs Act. In addition, the Act also reduced the minimum SPR volume set by Congress from 300 million barrels to 254.2 million barrels.

As this period is coming to a close, the average daily release since May 1 has been 873,000 barrels. This lower volume provides the President with little leverage to use before proceeding with the last remaining release under the program.

Adam Austera, chief analyst at Ozios

* Past performance is no guarantee of future results

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.