Oil prices rose on Tuesday, with Brent topping $70, as optimism grew over the fuel demand outlook during the summer driving season of the United States, the world’s top oil consumer.
Prices were also boosted after data from China showed that factory activity expanded at its fastest this year in May.
Brent crude futures for August gained 86 cents, or 1.2%, to $70.18 a barrel by 0504 GMT.
Brent earlier hit a session peak of $70.29, the highest day rise price since March 8.
“While there are concerns over tighter COVID-19 related restrictions across parts of Asia, the market appears to be more focused on the positive demand story from the U.S. and parts of Europe. In the U.S., the summer driving season officially got underway following the Memorial Day weekend, and we have entered this period with gasoline inventories already trending lower, and not too far from a 5-year low for this time of the year. analysts from ING Economics.
A robust recovery in the U.S. and Europe has given OPEC+ the confidence that global markets can absorb additional barrels, despite the COVID-19 comeback in parts of Asia and the prospect of more supply from Iran should a nuclear deal be revived. OPEC’s Joint Technical Committee forecast stockpiles will decline by at least 2 million barrels a day from September through December.
OPEC+ decided in April to return 2.1 million barrels per day (BPD) of supply to the market from May to July, as it anticipated global demand would rise despite surging coronavirus cases in India, the world’s third-largest oil consumer.
“We believe that the market will be able to absorb this additional supply, and so would expect the group to confirm that they will increase output as planned over the next 2 months,” ING Economics analysts
Meanwhile, Asian refiners, are struggling with what’s expected to be a brief period of weak profits amid the resurgence of the COVID-19 Virus causing a decline in oil demand. Complex refining margins in Singapore, a proxy for the region, have slumped since the end of April, but accelerating vaccination rates are expected to aid demand.