Oil Extends Advance Above $70 Amid Improving Demand Outlook
Oil Extends Advance Above $70 Amid Improving Demand Outlook
(Bloomberg) -- Oil extended gains above $70 a barrel after an industry report pointed to another draw in U.S. crude stockpiles, reinforcing optimism around the demand recovery.
Futures in New York rose 0.4% after settling above the threshold on Tuesday for the first time since October 2018. The American Petroleum Institute reported crude inventories declined by 2.11 million barrels last week, according to people familiar with the data. The market for Middle Eastern crude is also showing signs of strength, adding to the positive outlook.
The robust rebound has been underpinned by a demand recovery in the U.S., China and Europe, and there are signs the Covid-19 resurgence in Asia may be easing. The U.S. State Department loosened its travel warnings for nations around the world, which could pave the way for more airline travel.
“The demand story remains constructive for the market, with global Covid-19 cases declining for several weeks now,” said Warren Patterson, the head of commodities strategy at ING Group in Singapore. “I find it difficult to see significant further upside, particularly when you consider that OPEC+ are sitting on more than 6 million barrels a day of spare capacity.”
The prompt timespread for Brent was 42 cents in backwardation -- a bullish market structure where near-dated contracts are more expensive than later-dated ones. That compares with 37 cents at the beginning of last week.
U.S. gasoline stockpiles rose by 2.41 million barrels last week, while distillates -- a category that includes diesel -- increased by 3.75 million barrels, the API said. If government data due Wednesday confirms nationwide crude inventories dropped, it would be a third weekly decline.
Meanwhile, there are some indications that India’s deadly virus wave may be easing. The rate of new infections has slowed, while the nation’s oil refiners are taking advantage of weak demand to carry out maintenance in anticipation of a revival in fuel consumption in the coming months.
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