Oil prices on Wednesday extended the previous day’s small gains after an industry report showed U.S. crude stockpiles fell last week, overriding trader and investor concerns about transportation curbs in some countries as COVID-19 cases surge.
While the highly contagious Delta variant of the coronavirus is taking hold in many countries, prompting new lockdowns or movement restrictions from Australia to Portugal, hopes of a broader recovery in demand for fuel remain intact.
On the last day of June, Brent oil is heading for another monthly gain, which would mean the contract has risen for six out of the last seven months. U.S. crude has traded similarly since November.
“Futures have been trading on a one-way ripper to the upside ever since the November 2 headline declaring a Covid-19 vaccine had been developed,” Bob Yawger, director of energy futures, at Mizuho Securities.
Crude stocks in the U.S. were down by 8.2 million barrels, the American Petroleum Institute’s data showed, according to two sources.
Still, gasoline inventories rose by 2.4 million barrels, and distillate stocks were up by 428,000 barrels, the sources said.
But hopes for a broad recovery received a boost from Mohammad Barkindo, Secretary-General of the Organization of the Petroleum Exporting Countries (OPEC), who said on Tuesday that demand is expected to rise by 6 million barrels per day (BPD) in 2021, with 5 million BPD of that in the second half of the year.
He laid out the forecast in a meeting of the Joint Technical Committee of OPEC+; an alliance made up of OPEC members along with Russia and other producers.
The meeting will decide on the group’s oil production policy as it moves to release some of the barrels it has been withholding from the market to support prices after the evaporation of demand in 2020.
“We continue to believe that the group will agree on a supply increase of around 500,000 bpd. However, there clearly is the potential for a few surprises, with some members likely to believe that current price levels justify a more meaningful increase.” ING Economics.