Oil and gasoline futures posted their second weekly gain in a row as expectations for an increase in demand from the northern hemisphere’s summer begin to come to fruition.
West Texas Intermediate (WTI) for July delivery increased 1.18 percent to US$69.62 a barrel. It rose 4.98 percent this week, the largest such increase since mid-April.
Brent crude for July delivery was up 0.81 percent at US$71.89 a barrel. It ended the week 4.61 percent higher, and above the psychological US$70-a-barrel mark for the first time in more than two years, nearing a technical level that might spur renewed flows into the market.
A string of data this week so far affirmed the market’s bet that higher COVID-19 vaccination rates and continuing reopening efforts are unleashing pent-up demand this summer.
On the supply side, oil is garnering support from deferred expectations on a renewed nuclear deal with Iran and OPEC+’s cautious approach to bringing back output.
“The domestic story remains good and OPEC+ seems to be not aggressively increasing supply,” US Bank Wealth Management senior investment strategist Rob Haworth said.
The market has been hoping for a return to “a more normal travel season, and that’s the data we’re seeing in the US and Europe,” he added.
Without an immediate revival of the Iran nuclear accord looming over the market, traders see prices grinding higher as the summer demand story unfolds. US government data this week served as confirmation that the world’s largest oil-consuming country is in the midst of a demand revival with the onset of the summer travel season, while other countries are also showing strength.
A gauge of gasoline consumption inched up for a third straight week to its highest since March last year, a US Energy Information Administration weekly storage report said.
In the UK, government data showed road fuel sales jumped last week to near levels seen before the COVID-19 pandemic.
While the rebound remains patchy in parts of Asia, the sharp recovery taking shape in the West is spurring calls for OPEC+ to ensure the market does not overheat.
The OPEC+ alliance, which this week agreed to hike output next month, might need to keep adding barrels to the market in August or September to meet the recovery, Gazprom Neft PJSC chief executive officer Alexander Dyukov said.
Helping keep oil prices afloat this year has been renewed interest from commodity index investors who are looking for ways to hedge inflation in their portfolios, Rabobank NV commodities strategist Ryan Fitzmaurice wrote.
Investment dollars from this category of investors tends to be much “stickier” than other groups of traders.
Even so, financial flows into the oil market are still somewhat muted. Trading volumes have remained light and speculative positioning in oil is relatively low, which could pave the way for higher prices in the coming months, Citigroup Inc analysts, including Francesco Martoccia, wrote in a report.
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