Oil prices climb on signs of strong fuel demand recovery

SINGAPORE: Oil prices rose for a second session on Wednesday on signs of strong fuel demand in western economies, while the prospect of Iranian supplies returning faded as the US secretary of state said sanctions against Tehran were unlikely to be lifted.

Brent crude futures were up 32 cents, or 0.4%, at $72.54 a barrel at 0640 GMT, having earlier touched $72.83, the highest since May 20, 2019. Brent rose 1% on Tuesday.

US West Texas Intermediate (WTI) crude futures climbed 31 cents, or 0.4%, to $70.36 a barrel, after rising to as high as $70.62, highest since Oct. 17, 2018. WTI prices climbed 1.2% on Tuesday.

“Improved demand outlook appears to be bolstering crude oil prices, as the successful vaccine rollouts and summer driving season in the United States and Europe continues to support fuel demand,” said Margaret Yang, a strategist at Singapore-based DailyFX.

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Recent traffic data suggests travellers are hitting the roads as restrictions ease, ANZ Research analysts said in a note, pointing to TomTom data which showed traffic congestion in 15 European cities had hit its highest since the coronavirus pandemic began.

On Tuesday, the US Energy Information Administration forecast fuel consumption growth this year in the United States, the world’s biggest oil user, would be 1.49 million barrels per day (bpd), up from a previous forecast of 1.39 million bpd.

In another positive sign, industry data showed US crude oil inventories fell last week, in line with analysts’ expectations, according to a Reuters poll.

The American Petroleum Institute reported crude stocks fell by 2.1 million barrels in the week ended June 4, two market sources said, citing the data.

Stockpile data from the US Energy Information Administration is due on Wednesday at 1430 GMT.

Price gains had been capped in recent weeks as oil investors had been assuming that sanctions against Iranian exports would be lifted and oil supply would increase this year as Iran’s talks with western powers on a nuclear deal progressed.

However US Secretary of State Antony Blinken said on Tuesday that even if Iran and the United States returned to compliance with a nuclear deal, hundreds of US sanctions on Tehran would remain in place.

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