Oil climbs on demand optimism as market volatility takes a hit
(Bloomberg) – Oil traded near the highest close in more than two years as optimism over rising demand from the United States outweighed fears that Iranian supplies would increase if sanctions on official exports are lifted.
West Texas Intermediate edged up after leveling off at its strongest since October 2018 on Thursday. With prices stuck in a $ 10 range since March, market volatility has taken a hit, falling to its lowest level since August on the global benchmark Brent.
As the US economy recovers from the pandemic, more drivers are taking to the roads and stocks are running out. Monday marks Memorial Day in the United States, a holiday weekend that sees the start of the summer driving boom in the United States
This positive image is clouded, at least for the moment, by fears that negotiations in Vienna between Tehran and the world powers to revive a nuclear deal pave the way for the lifting of US sanctions. If a deal is struck, Iranian crude shipments could increase just as the Organization of the Petroleum Exporting Countries and its allies relax collective restrictions on exports. Meanwhile, the threat of new coronavirus variants and outbreaks in parts of Asia continues to threaten consumption in a handful of regions.
“Traders envision a bullish summer for oil even with Iran returning to the party,” said Stephen Brennock, analyst at PVM Oil Associates Ltd. “This month can be summed up in one word: hesitation,” he said.
The ministers of the OPEC + alliance, led by Saudi Arabia and Russia, are due to meet on June 1 to assess the world market and their production policy. All but four analysts and traders surveyed by Bloomberg predicted they would ratify an 840,000 barrels-per-day hike scheduled for July, completing a three-step process to raise to just over 2 million barrels this summer.
The positive market outlook is reflected in the longer term spreads of WTI. The US benchmark price for December 2021 was up to $ 5 a barrel higher than that of futures contracts for the same month in 2022. The spread widened by nearly $ 1 this week to reach its highest level since mid-March.
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