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Oil Rises From Highest Since 2018 on Strengthening Demand

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These translations are done via Google Translate

By Elizabeth Low and Alex Longley

(Bloomberg) Oil extended gains after OPEC+ provided an upbeat assessment of the demand outlook and prospects waned for a speedy return of Iranian barrels to the market.

Futures in New York rose 1% after closing at the highest since October 2018. Brent also climbed after settling above $70 a barrel. Saudi Energy Minister Prince Abdulaziz bin Salman on Tuesday said demand “has shown clear signs of improvement” as the alliance rubber-stamped an output boost for July. Road traffic in the U.K. was higher than pre-pandemic levels for the first time last week, the latest indicator of an uptick in consumption.

The markets structure has rallied, with the spread between the nearest two December contracts for West Texas Intermediate heading for the strongest close since 2019. That gauge indicates growing expectations for market tightness.

Brent crude settles above $70 on signs of tightening market

Crude’s rally to a two-and-a-half year high was aided by an indication that world powers and Iran aren’t likely to revive a 2015 nuclear deal any time soon. There was hope an agreement would be reached this month, but participants in the talks are set to head back to their capitals after meeting Wednesday, cooling speculation that the U.S. might soon lift sanctions on Iranian oil exports.

Sky Eye Measurement

There continue to be signs of recovery in consumption, particularly in the U.S., where Memorial Day weekend trips boosted gasoline demand and air travel. The International Energy Agency says consumption may hit pre-pandemic levels in a year, speedier than previous estimates.

Sky Eye Measurement

“The strong demand dynamics and likely delays in the Iran nuclear deal negotiations pushed oil prices above the much-watched $70 a barrel level,” said Norbert Ruecker, an economist at Julius Baer. “We expect prices to move well beyond $70 toward mid-year.”

  • West Texas Intermediate for July rose 68 cents to $68.40 a barrel by 11:11 a.m. London time
  • Brent for August settlement climbed 84 cents to $71.09

The rally in market structure is rippling all the way along the futures curve. U.S. crude for December 2022 was about $3.50 more expensive than futures for a year later, the strongest for that gauge since October 2018 on a rolling basis. Still, the pandemic is casting a shadow over the demand picture for the second half of this year.

Other market news:
  • From bustling U.S. airports to surging gasoline demand, all signs from this past Memorial Day weekend reaffirm the oil market’s bet that Americans will be out traveling in force this summer.
  • Russia kept its oil production almost flat in May as ramp-ups, which were earlier granted to the nation as an exception, were extended to the entire OPEC+ alliance.
  • The oil and gas industry is set to boost investments in clean energy this year, but that still won’t be enough to put the world on a path to limit a dangerous rise in global temperatures, according to the IEA.

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