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Oil Rises Above $71 Amidst Improved Demand Outlook

Oil prices held near multi-year highs on Monday, underpinned by an improved outlook for demand as increased COVID-19 vaccinations help lift travel curbs.

Brent crude was up 14 cents, or 0.2 per cent, at $72.83 by 01:23 GMT. It rose 1.1 per cent last week and hit the highest since 2019.

US West Texas Intermediate was also up 14 cents, or 0.2 per cent, at $71.05 a barrel, after reaching the highest since 2018.

oil chart
U.S WTI Performance Chart

Americans are becoming increasingly comfortable meeting friends, going back to workplaces, and attending large-scale events, as US daily air travellers topped two million for the first time since the pandemic began. Vehicle traffic is also returning to pre-pandemic levels in North America, and much of Europe and more planes are in the air as lockdowns and other restrictions are being eased, driving three weeks of gains for the oil benchmarks. According to a CBS News survey,

The Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, need to increase output to meet recovering demand, the International Energy Agency (IEA) said in its monthly report.

“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” the IEA monthly report.

The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020.

Goldman Sachs said last week it expected Brent to rise to $80 per barrel mid-year as the rollout of inoculations boosts economic activity worldwide.

US oil rigs rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report. This was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.

Investors are also looking forward to talks in Vienna this week between Iran and world powers to revive a nuclear accord, potentially allowing US sanctions on the nation’s crude exports to be lifted.

However, Iran’s Deputy Foreign Minister Abbas Araghchi has cast doubt on the chances of reviving the pact before citizens elect a new president on June 18. Ebrahim Raisi, the hardline cleric, widely tipped to replace President Hassan Rouhani, said that he’d continue the negotiations if elected. Still, he will not treat them as a major national concern.

Read also; Oil Slips, but Poised for Third Weekly Gain on Demand Recovery.