Oil prices continued their rally today, ending the short-lived losing streak on signs of strong fuel demand in western economies such as the U.S. The prospect of Iranian supplies returning to the market is no cause for concern as the U.S. secretary of state, Antony Blinken, said sanctions against Tehran were unlikely to be lifted.
U.S. oil, West Texas Intermediate (WTI) crude futures climbed 0.4%, to trade at $70.35 a barrel, after reaching $70.62, the highest since October 2018, while the Brent crude futures were up 0.6%, to trade at $72.66 a barrel, having earlier touched $72.83, the highest since May 20, 2019.
PVM analysts stated, “The widespread faith that oil demand growth will trend significantly higher in the second half of the year is paving the way forward for the price rally.”
ANZ Research analysts said in a note that recent traffic data suggests travellers are hitting the roads as restrictions are easing, using TomTom data, which showed traffic congestion in 15 European cities had hit its highest since the coronavirus pandemic began.
On Tuesday, the U.S. Energy Information Administration (EIA) forecast fuel consumption growth this year in the United States would be 1.49 million barrels per day (BPD), up from a previous forecast of 1.39 million BPD. Another bullish indicator gotten from the EIA data on Tuesday is the crude stockpiles falling by 5.241 million barrels last week.
The price surge in oil has been hesitating because of oil investors assuming that sanctions against Iranian exports would be lifted and oil supply would increase this year as Iran’s talks with western powers on a nuclear deal progressed. However, U.S. Secretary of State Antony Blinken said on Tuesday that even if Iran and the United States returned to compliance with a nuclear deal, hundreds of U.S. sanctions on Tehran would remain in place.
Investors should however exercise caution as the latest crackdown by Chinese authorities to curtail the country’s bloated refining sector could see Chinese crude imports fall by around 3% or around 280,000 barrels per day, according to sources.