Oil futures climbed on Friday as optimistic expectations for crude demand help set prices up for a weekly gain of around 5%.
“Not every country in the world is on a full recovery mode yet, but at the moment no hiccup seems able to reverse the bullish momentum ushered in by strong summer demand,” said Louise Dickson, oil markets analyst at Rystad Energy, in daily commentary. “It’s not only summer demand, it’s also progress in vaccination campaigns and major pushes by governments to convince people to inoculate.”
West Texas Intermediate crude for July delivery rose 76 cents, or 1.1%, to $69.57 a barrel on the New York Mercantile Exchange. August Brent crude, the global benchmark, was up 66 cents, or 0.9%, at $71.97 a barrel on ICE Futures Europe after trading as high as $72.17.
WTI was headed for a 4.9% weekly rise, while Brent was up 4.7%.
“Oil prices are finding tailwind from the clear signs that demand is making a solid recovery,” wrote analysts at Commerzbank, in a note.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, and the International Energy Agency are looking for oil demand to recover further. The IEA, which now sees demand back at pre-crisis levels in a year, had previously not expected that to happen until 2023, the analysts noted.
“If OPEC+ does not step up its supply any further after July, the oil market risks tightening noticeably in the second half of the year,” the Commerzbank analysts wrote.
OPEC+ agreed earlier this week to proceed with a timetable that will see it continue to ease output curbs through July.
OPEC+ members showed “little interest in accelerating the end of record supply cuts,” with the group holding firm on an existing timeline to gradually return roughly 2 million barrels per day by the end of July, said Robbie Fraser, global research & analytics manager at Schneider Electric, in a market update.
“Still, that strategy is likely to come under increasing internal scrutiny” as prices trade at or above the $70 level, with “Russia already pushing for further production increases over the latter half of the year,” he said.
Meanwhile, talks between Iran and world powers on reviving the 2015 Iran nuclear deal, which could lead the U.S. to lift sanctions on Tehran, allowing it to contribute more oil to world supplies, have dragged on.
A U.S. State Department spokesman on Thursday said the U.S. expects to have a sixth round of indirect talks on reviving the deal, according to Reuters.
Some oil traders “thought that a comeback of Iranian supply would offset the summer demand uptick, but the negotiations now have slowed, another helping hand for the oil bulls,” said Rystad’s Dickson.
The strong prices for oil are “justified in today’s market and will likely stay until at least through mid-summer, namely July, when the current OPEC+ consensus expires,” she said. “What happens after July is anyone’s guess, as a lot will depend on the new policy that will be outlined by OPEC+.” The oil-producer group will next meet on July 1.
Over in the U.S., data from the Energy Information Administration on Thursday revealed a 5.1 million-barrel decline in domestic crude inventories for the week ended May 28, but supplies of gasoline and distillates climbed.
In Friday dealings, July gasoline edged up by 0.7% to $2.22 a gallon, while July heating oil rose 0.6% to nearly $2.12 a gallon. Both contracts traded around 3.7% higher for the week.
July natural gas traded flat at $3.04 per million British thermal units, poised for a weekly rise of roughly 1.9%.