Oil Climbs From 2018 High as Report Signals Falling Stockpiles

(Bloomberg) -- Oil extended gains after closing at the highest since October 2018 as an industry report pointing to a decline in U.S. crude stockpiles reinforced optimism over the demand recovery.

Futures in New York rose above $69 a barrel after adding almost 4% over the previous two sessions. The American Petroleum Institute reported inventories fell by 5.36 million barrels last week, according to people familiar. That would be the biggest draw in a month if confirmed by official data.

Oil is in “strong demand right now,” with economies around the world opening up, Daniel Yergin, the oil historian and vice chairman at IHS Markit Ltd., told Bloomberg Television, predicting prices could rise as high as $80 a barrel.

Optimism around rising fuel demand is growing as the U.S., China and Europe rebound strongly from the pandemic, with upbeat comments from OPEC+ and the International Energy Agency this week adding to the positive outlook. The Covid-19 comeback across Asia and Latin America, however, is a reminder that the recovery is likely to be uneven and bumpy.

The decline in Asian demand has been offset by the recovery in Europe, which has exceeded expectations, said Suvro Sarkar, an energy analyst for DBS Bank Ltd. There are still risks ahead with the potential return of barrels from Iran, while OPEC+ is gradually returning more oil to the market, he said.

The market is firming in a bullish structure. The prompt timespread for Brent was 39 cents in backwardation -- where near-dated prices are more expensive than later-dated ones. That compares with 14 cents a week earlier.

U.S. gasoline stockpiles rose by 2.51 million barrels last week, according to the API report. Distillate inventories -- a category that includes diesel -- also climbed. Government data due later Thursday is forecast to show nationwide crude stockpiles declined by 2.53 million barrels.

Nuclear talks between Iran and world powers, meanwhile, have been adjourned until next week as differences between Tehran and the U.S. delay the revival of a deal. The prospect of returning Iranian barrels is setting up a possible battle to supply the South Korean market with condensates.

©2021 Bloomberg L.P.