West Texas Intermediate was 1% higher, earlier touching its highest level intraday since 2018. Despite a bumper rally this year, traders Glencore Plc and Vitol Group still see at least some further gains in oil. Those views came at the FT Commodities Global summit, where opinions aired included:
- Global demand should return to normal in the third quarter of next year, according to Alex Sanna, head of oil marketing at Glencore, who said crude prices may move higher on more widespread vaccinations and inflationary pressures
- Diesel and petrochemical demand is already at pre-Covid levels, according to Russell Hardy, Vitol’s chief executive officer, adding that there is a “little bit more upside” for oil prices
- There’s a chance oil could hit $100 a barrel on a lack of supply amid underinvestment in the sector, according to Trafigura CEO Jeremy Weir
Crude has soared this year as vaccination programs have turned the tide against the pandemic in the U.S., Europe and China. Gasoline demand in China last month was 5% higher than during the same period in 2019, according to the median of five estimates from the nation’s top oil companies including China Petroleum & Chemical Corp., better known as Sinopec.
Meanwhile money continues to rotate into the commodities sector more broadly. A monthly survey of fund managers by Bank of America showed that bullish commodities bets had overtaken Bitcoin as the most crowded trade in markets.
“Continuous supply deficit is as good as guaranteed for the coming six months,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. “The role of the OPEC alliance will remain as crucial as it has been since the break-out of the health crisis.”
Still, a decision by the U.K. to extend virus restrictions has tempered some optimism around robust summer consumption. On Monday, World Health Organization Director-General Tedros Adhanom Ghebreyesus warned that the virus is now “moving faster than the global distribution of vaccines.”
See also: Citi Sees Summer Season as Constructive for Oil, Energy
Further along the oil futures curve, there are signs of market tightness. The difference between the nearest two WTI December contracts on Tuesday hit $6, heading for its strongest close since September 2019, a sign traders are betting on a stronger market. The spread between the next two December contracts is at the strongest since 2018.