Oil prices rose during the Asian session today as Brent Crude broke through $70 due to investors’ bullish sentiment on the demand outlook for fuel during the summer season in the United States. The country has also had a very successful COVID-19 vaccination rollout so far with cases hitting a record low.
Prices were also boosted after data from China showed that factory activities increased at their fastest pace in May.
Brent crude futures are trading at $70.28 a barrel, gaining 1.28%, while U.S. West Texas Intermediate (WTI) crude is trading at $67.73 a barrel, gaining 2.16% as of the time of writing this report. Brent’s current peak is the highest intraday price since March 8.
Analysts from ING Economics stated, “While there are concerns over tighter COVID-19 related restrictions across parts of Asia, the market appears to be more focused on the positive demand story from the U.S. and parts of Europe.”
They further said, “In the U.S., the summer driving season officially got underway following the Memorial Day weekend, and we have entered this period with gasoline inventories already trending lower, and not too far from a 5-year low for this time of the year.”
Tracking firm GasBuddy stated that Sunday’s U.S. gasoline demand jumped 9.6% above the average of the previous four Sundays, the highest Sunday demand since the summer of 2019. The price gains were capped, though, as more demand is expected to hit the market.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+), may agree to continue the slow easing of general output at the next meeting, OPEC sources said, as producers balance an expected recovery in demand against a possible inflow of Iranian output. OPEC+ decided in April to return 2.1 million barrels per day (BPD) of supply to the market from May to July, in anticipation that global demand would rise despite surging coronavirus cases in India, the world’s third-largest oil consumer.
“We believe that the market will be able to absorb this additional supply, and so would expect the group to confirm that they will increase output as planned over the next 2 months,” ING Economics analysts added.