Oil holds near multi-year highs as vaccine rollout pushes demand

Americans are becoming more comfortable meeting friends, returning to offices and attending large events, as per a survey.

OPEC+ needs to open the taps to keep up with rising oil demand [File: Matthew Busch/Bloomberg]

Oil prices held near multi-year highs on Monday, underpinned by an improved outlook for demand as increased COVID-19 vaccinations help lift travel curbs.

Brent crude was up 14 cents, or 0.2 percent, at $72.83 by 01:23 GMT. It rose 1.1 percent last week and hit the highest since May 2019 of $73.09 on Friday.

US West Texas Intermediate was also up 14 cents, or 0.2 percent, at $71.05 a barrel, after reaching the highest since October 2018 at $71.24 on Friday and rising 1.9 percent on the week.

Americans are becoming increasingly comfortable meeting friends, going back to workplaces, and attending large-scale events, according to a CBS News survey, as US daily air travellers topped two million for the first time since the pandemic began.

Vehicle traffic is returning to pre-pandemic levels in North America and much of Europe and more planes are in the air as lockdowns and other restrictions are being eased, driving three weeks of gains for the oil benchmarks.

Open the taps

The Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, needs to increase output to meet recovering demand, the International Energy Agency (IEA) said in its monthly report on Friday.

The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020.

“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” the IEA said.

Goldman Sachs said last week it expected Brent to rise to $80 per barrel mid-year as the rollout of inoculations boosts economic activity around the world.

US oil rigs rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.

It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.

Crude has digested a lot of incremental, bullish news during the past week, with the US and Europe reopening, according to Vandana Hari, founder of Vanda Insights. Prices could creep higher across the coming weeks but “at a more gradual pace,” with the market awaiting fresh momentum, Hari said.

Traders are also tracking talks in Vienna this week between Iran and world powers to revive a nuclear accord, potentially allowing US sanctions on the nation’s crude exports to be lifted. Iran’s Deputy Foreign Minister Abbas Araghchi has cast doubt on the chances of reviving the pact before citizens elect a new president on June 18. Ebrahim Raisi, the hardline cleric widely tipped to replace President Hassan Rouhani, said that he’ll continue the negotiations if elected, but he will not treat them as a major national concern.

Traders remained optimistic about the scope for further gains, according to weekly data from the Commodity Futures Trading Commission. Money managers have boosted their WTI bets to the most bullish in about three years.

Source: News Agencies


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