Oil futures started the week on a mixed note, with U.S. crude prices down a few pennies, but global benchmark crude up on optimism over a recovery in global demand.
“With limited exception, crude and product prices have consistently marched higher in 2021, as the prospect of a global demand recovery has overshadowed the potential for new supply to hit the market,” said Robbie Fraser, global research and analytics manager at Schneider Electric.
Regarding demand, “some recent support is likely tied to talks around the Iranian nuclear deal, which while ongoing, have failed to deliver a breakthrough that would allow Iran to resume oil exports without the threat of U.S. sanctions,” said Fraser, in a note.
Iran’s foreign ministry has “offered a more cautious tone in recent days, in contrast to some more optimistic quotes that had been released in previous weeks,” he said. “Still, Iran has stated there is broad agreement around the terms of a renewed deal, even as specific items remain unresolved.”
West Texas Intermediate crude for July delivery edged down by 3 cents, or 0.04%, to settle at $70.88 a barrel on the New York Mercantile Exchange, posting a loss for the first time in three sessions. Prices based on the front-month contract had finished Friday at the highest since October 2018.
Global benchmark August Brent crude, however, gained 17 cents, or 0.2%, to settle at $72.86 a barrel on ICE Futures Europe, the highest finish since April 2019, according to Dow Jones Market Data.
“Good sentiment on the financial markets and the optimistic demand outlook indicated by leading energy agencies are contributing to the upswing,” said Eugen Weinberg, analyst at Commerzbank, in a note.
The International Energy Agency helped buoy sentiment at the end of last week. It is monthly report on Friday projected demand to rise in 2021 before growing at a faster rate next year, reaching 100.6 million barrels a day by the end of 2022.
“Vehicle use is starting to return to pre-pandemic use in the U.S. and Canada, while in the U.K. it already has returned to levels just prior to the pandemic, as less people use public transport and use their own vehicles to move around,” Michael Hewson, chief market analyst at CMC Markets UK, said in a market update. “While this is likely to see higher gasoline demand, this should be offset to some extent by lower demand for aviation fuel due to there being less air travel.”
Talk of Iranian sanctions being lifted may well be acting as a bit of a headwind for oil prices, Hewson added.
Discussions resumed on Saturday with European Union representative Alain Matton telling reporters in Vienna: “We are making progress, but the negotiations are intense and a number of issues (remain), including on how steps are to be implemented,” according to the Associated Press.
Meanwhile, U.S. benchmark stock indexes saw mixed trading Monday as investors prepared for this week’s meeting of Federal Reserve policy makers, which will conclude Wednesday.
Investors will be looking for clarity from policy makers on their views on rising inflation pressures and the timing of any effort to begin reining in the Fed’s bond-buying program.
Back on Nymex, petroleum product prices moved down along with oil. July gasoline shed 0.7% to $2.17 a gallon and July heating oil lost 0.4% to $2.11 a gallon.
July natural gas bucked the trend to settle at $3.35 per million British thermal units, up 1.7% to the highest finish since October of last year.