Oil posted a gain this week as expectations for growing economic activity in nations from the US to Europe fueled optimism around stronger summer demand.
In the first back-to-back weekly increase since early March, West Texas Intermediate for June delivery on Friday rose US$0.19 to settle at US$64.90 a barrel, up 2.08 percent for the week.
Brent crude for June delivery rose US$0.19 to US$68.28 a barrel, increasing 2.28 percent from a week earlier.
In the US, refineries are running at their highest rate since the COVID-19 pandemic began, as they gear up for the summer driving season.
“Traveling by air here in the US and driving — we expect to continue to see upward strength in the days and weeks ahead,” said Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC.
Declining crude inventories and progress in reopenings in the US are boosting oil prices, he said.
Crude’s advance this week comes amid strength in the broader commodities sector.
The head of UBS Commodities this week said in a Bloomberg Television interview that he expects commodities to rally further, in part due to supply discipline from OPEC and its allies.
While the group is gradually restoring some output, they are confident the market can absorb the extra production.
“The strong recovery of demand in the second half of the year, coupled with continued good production discipline on the part of OPEC+, is likely to tighten supply considerably and lend support to oil prices,” said Eugen Weinberg, head of commodities research at Commerzbank AG.
The US’ disappointing jobs report this week supports a weaker US dollar in the short term, which would add fuel to the commodity rally, Oanda Corp senior market analyst Edward Moya said.
With crude prices gaining this week, trading of oil options that could profit from a move up toward US$90 and US$100 a barrel has surged.
The equivalent of more than 30 million barrels of US$100 calls have changed hands so far this week.
However, there are still lingering concerns around the spread of COVID-19 in India, the third-largest oil importer.
While a model prepared by advisers to Indian Prime Minister Narendra Modi suggests the outbreak could peak in the coming days, the group’s projections have been changing and were wrong last month.
“Despite all the optimism we’re seeing in Europe and in the US, you’re going to see prices remain steady,” Moya said. “Eventually, it’ll take off once the demand outlook improves across most of Asia.”
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