By Adedapo Adesanya
Crude rose nearly by 2 per cent to their highest in more than two years on Tuesday, June 15, buoyed by expectations that demand will recover rapidly in the second half of 2021.
Yesterday, the Brent crude traded at $74.28 per barrel after it gained $1.42 or 1.95 per cent, while the West Texas Intermediate (WTI) crude rose by 1.75 per cent or $1.24 to trade at $72.12 per barrel.
The world’s biggest oil traders said they see oil prices staying above $70 a barrel with demand expected to fully return to pre-pandemic levels in the second half of the year.
With the Brent oil futures hitting $74, this signified the highest for the global benchmark since April 2019.
Oil executives reportedly held a commitment that oil will remain between $70 and $80 a barrel for the remainder of 2021 on the expectation that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) keep supply discipline, even if Iran’s exports resume in the instance that the United States rejoins a nuclear agreement with Tehran.
However, the market has quelled the fears associated with the additional supply entering the scene as many pointers show the discussion about a 2015 deal on Iran’s nuclear programme, which resumed last week is coming at a slow pace.
The optimism is also coming with vaccinations underway and COVID-19 lockdowns easing in the US and Europe, coinciding with a time that many are often outside, meaning that there is an increase in fuel use.
There was also good news as the American Petroleum Institute (API) on Tuesday reported a draw in crude oil inventories of 8.537 million barrels for the week ending June 11.
Analysts had predicted a much smaller draw of 3.290 million barrels for the week.
In the previous week, the API reported a draw in oil inventories of 2.108 million barrels after analysts had predicted a draw of 2.036 million barrels. Crude oil inventories have fallen by more than 22 million barrels since the start of 2021.
The market will be waiting for the latest data from the Energy Information Administration (EIA) due on Wednesday to corroborate this and if there is a large draw, the market will likely continue its bullish trend.
Investors and traders are also watching the outcome of a two-day US Federal Reserve meeting that starts on Tuesday for signals on when it will start to scale back monetary stimulus.
The US Federal Reserve is getting ready to debate how and when to start tapering a massive asset-purchase program that helped to support the US economy during the pandemic.
Dipo Olowookere