The rise in oil prices continues on the outlook for strong summer demand
Through Andres Guerra Luz at 2/6/2021
(Bloomberg) – Oil extended its gains with signs of recovering demand from the United States to Europe, fueling optimism among producers and analysts of the crude market.
New York futures jumped up to 1.9% on Wednesday, as global benchmark Brent crude hit its highest intraday level since January 2020. Oil is “in high demand right now.” Daniel Yergin, petroleum historian and vice president of the IHS consultant. Markit Ltd., said in an interview with Bloomberg Television. This week, the Saudi Energy Minister also said the demand picture was showing signs of improvement and Fatih Birol of the International Energy Agency said he expected a strong recovery in consumption. over the next six months.
The underlying structure of oil has also strengthened. The spread between the two closest December contracts for West Texas Intermediate is heading for the strongest close since 2019. This gauge indicates rising expectations for market tightening.
“There is a lot of room for the upside here,” said Bob Yawger, head of the futures division at Mizuho Securities. “Summer and the reopening of the economy are bullish for demand,” while “it seems much less likely that we will have Iranian barrels soon than last week.”
U.S. benchmark crude hit a two-and-a-half-year high this week and traders see prices climbing even higher with a resumption of the 2015 Iran nuclear deal still likely in months and real-time data confirming a rebound in summer demand underway in some countries. Gasoline demand in the United States reached its highest level since the start of the pandemic last week, according to Descartes Labs, while traffic on UK roads was for the first time above pre-pandemic levels .
Yet a solid recovery in consumption in parts of Asia remains elusive. Gasoline sales in India, the world’s largest market for motorcycles and scooters, slumped to the lowest level in a year as a devastating second wave of Covid-19 infections ravaged consumption.
- West Texas Intermediate for July delivery rose $ 1.01 to $ 68.73 per barrel at 1:50 p.m. in New York
- Brent for the August settlement climbed 99 cents to $ 71.24 per barrel after hitting $ 71.48 per barrel.
Oil also benefits from decarbonization spending, according to Goldman Sachs Group Inc., as it creates an economic stimulus. Raw materials are supported by scarcity of supplies as well as stronger demand from the United States and Europe after two decades in which China was the main buyer, said Jeff Currie, global head of research on commodities at Goldman, in an interview with Bloomberg Television.
“The bar for OPEC + has been lowered in recent weeks and months given all the money pouring into commodity markets and supporting prices,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “So all the group needs to do now is not to oversupply the market. “
In the United States, crude inventories are expected to decline last week, according to a Bloomberg survey. The industry-funded American Petroleum Institute releases its figures later Wednesday ahead of U.S. government data Thursday, both a day later than usual due to the U.S. public holiday.
Other market news:
- A major fire broke out in an oil refinery in the south of the Iranian capital, according to state television. The incident comes the same day a fire sank an Iranian Navy training ship in the Gulf of Oman, and less than two weeks after an explosion at another refinery in the oil-producing region of Abadan, in southwestern Iran.
- Schlumberger expects the economic recovery to trigger an energy industry supercycle that will increase the margins of the world’s largest oil services company.
- OPEC increased production last month as the group made plans to restart some of the supplies interrupted during the pandemic.