Oil skyrockets as demand hopes outweigh Iran supply risk
(Bloomberg) – Oil edged up as strong US economic data fueled a wider rally and Wall Street stuck with bullish views on rising commodity prices.
West Texas Intermediate rose above $ 66 a barrel, reversing a drop of as much as 1.1% earlier Thursday. Highlighting the recovery of the US economy and its consumption of oil, US drivers are driving almost as many miles on freeways as they did in 2019 and jobless claims have fallen to a new pandemic low with the reopening companies. Analysts at Goldman Sachs Group Inc. said commodities continue to face gradual tension in the second half of the year, with little evidence to suggest a supply response sufficient to derail the bull market.
Limiting further gains, Iran and world powers in Vienna are trying to revive a nuclear deal that could lift sanctions on the Persian Gulf nation’s oil flows. This could bring additional production to the market, just as the Organization of the Petroleum Exporting Countries and its allies are also relaunching some of their closed production.
“Optimism around demand is a major concern for Iran, so the risk of Iranian supply is on the back burner for now,” said Bart Melek, head of commodities strategy at TD Securities. “The United States is the biggest consumer,” and with more openness of the country, “the driving season could be pretty decent.”
U.S. crude futures have been stuck in a $ 10 trading range since March as a patchy recovery in global demand and supply concerns have dampened a rebound to new multi-year highs. An indicator of market volatility has fallen to its lowest since February, while overall open interest in WTI is down from its March high. Still, investment banks like Goldman and JPMorgan Chase & Co. remain bullish on the path for oil prices as the end of the year approaches.
Dips in commodity prices are “an obvious buying opportunity,” Goldman analysts Jeff Currie and Damien Courvalin said in a note. In petroleum markets, “stocks of end-use products and offshore petroleum continue to decline despite increasing stocks of crude oil landed.”
OPEC + ministers are due to meet on June 1 to review the state of the market and the group’s production policy. All but four of the 24 analysts and traders polled by Bloomberg News see the group affirming its plan to continue relaunching production next month.
Besides a potentially higher Iranian supply, ministers will also assess demand, including from the United States. Memorial Day weekend at the end of May usually heralds the start of the summer driving season. But gasoline stocks are already low and set the stage for a tight supply that typically only happens when a hurricane destroys refineries, according to a fuel distributor.
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