Home Finance Oil prices continue to rise on strong demand outlook in summer

Oil prices continue to rise on strong demand outlook in summer

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By Andres Guerra Luzu On 6/2/2021

(Bloomberg) — Oil extended gains, with signs of a recovery in demand in Europe from the US fueling optimism among producers and analysts in the crude market.

Futures in New York rose up to 1.9% on Wednesday, while global benchmark Brent crude rose to its highest intraday level since January 2020. Oil is in “strong demand right now”, Daniel Yergin Markit Ltd, vice president of oil historian and consultant IHS, said in a Bloomberg television interview. This week, Saudi Arabia’s energy minister also said the demand picture showed signs of improvement and Fatah Birol of the International Energy Agency said he saw a strong consumption recovery over the next six months.

The underlying structure of the oil has also strengthened. The spread between the two nearest December contracts for West Texas Intermediate is headed for the strongest close since 2019. This gauge indicates rising expectations of market tightness.

“There’s a lot of room for upside here,” said Bob Yeager, head of the futures division at Mizuho Securities. “The heat and the economy are accelerating in demand,” while “it is highly unlikely that we will have Iranian barrels any sooner than last week.”

US benchmark crude rose to a two-and-a-half-year high this week and traders see prices rising even higher with the 2015 Iran nuclear deal revival still months away and real-time data from some countries. The spurt in summer demand is being confirmed. . US gasoline demand was at its highest since the pandemic began last week, while traffic on UK roads exceeded pre-pandemic levels for the first time, according to Descartes Labs.

Still, a solid consumption recovery in parts of Asia remains elusive. Gasoline sales in India, the world’s largest market for motorcycles and scooters, fell to their lowest level in a year, as a devastating second wave of Covid-19 infections hit consumption.

Prices:

  • West Texas Intermediate for July delivery rose $1.01 to $68.73 a barrel at 1:50 p.m. in New York
  • Brent for August settlement climbed 99 cents to $71.24 a barrel, hitting a high of $71.48 a barrel.

According to Goldman Sachs Group Inc., oil is also benefiting from decarbonization spending, as it is creating economic stimulus. In a Bloomberg television interview, Goldman’s Global Head of Commodities Research Jeff Curry said that after two decades the shortage in supply as well as strong demand from the US and Europe is driving the commodity down.

“The bar for OPEC+ has been lowered in recent weeks and months with all that money pouring into commodity markets and supporting prices,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “So now there is no need to over-supply the market to all groups.”

According to a Bloomberg survey, US crude oil reserves are expected to decline last week. The industry-funded American Petroleum Institute reports its figures on Wednesday ahead of US government figures on Thursday, a day later than usual due to both the US Memorial Day holiday.

Other Market News:

  • A massive fire has broken out at an oil refinery south of the Iranian capital, according to state television. The incident comes on the same day that an Iranian Navy training ship sank in the Gulf of Oman, and less than two weeks after it exploded at another refinery in the oil-producing region of Abadan, Iran’s southwest.
  • Schlumberger hopes the economic recovery will trigger an energy-industry supercycle that will shrink margins for the world’s largest oilfield-services company.
  • OPEC increased output last month as the group moved forward with plans to restart some of the supplies stalled during the pandemic.

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of knews.uk and knews.uk does not assume any responsibility or liability for the same.

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