Futures in New York climbed above $65 a barrel. U.S. gasoline consumption expanded last week to the highest level since November, while U.K. road use has also been climbing. Profit from producing the motor fuel has soared, a move which could drive a crude rally over the summer, according to RBC Capital Markets.
There are risks to the outlook though. OPEC downgraded its oil-market outlook over the next two quarters as the pandemic’s effects will continue to be felt, the group said in its monthly report. Output from the Organization of Petroleum Exporting Countries fell last month as Saudi Arabia implemented extra cutbacks to speed the market’s rebalancing.
Oil’s rally of more than 30% so far this year has taken a breather in recent days. Still the market has been tightening amid output cuts from OPEC+ members and as the outlook for demand improves with the rollout of Covid-19 vaccines.
“The rise in oil prices today looks to come on the back of positive risk sentiment on global financial markets,” said Jens Pedersen, senior analyst at Danske Bank. “With the next OPEC+ meeting less than three weeks away there is a limit to how high prices can go due to the potential for OPEC+ to start normalising output.”
It’s possible that U.S. crude may have to trade at a bigger discount to the global Brent benchmark, according to consultant Energy Aspects. That comes as the Brent market faces headwinds form refinery maintenance and sharp cuts to Saudi OSPs, forcing U.S. crude to trade even lower in turn, the consultant said.
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