U.S. crude futures climbed to the highest in more than two-and-a-half years on Tuesday after the OPEC+ alliance forecast a tightening global market, while international efforts to revive a nuclear deal with Iran were yet to reach a breakthrough.
West Texas Intermediate rose as much as 3.8% from Friday’s close to $68.87 a barrel, while global benchmark Brent topped $71 in early trade, a level it has failed to hold for a sustained period since 2019.
The oil glut built up during the coronavirus pandemic has almost gone and stockpiles will slide rapidly in the second half of the year, according to an assessment of the market from an OPEC+ committee.
Traders say expectations grew for increased fuel demand during the northern hemisphere summer driving season in the US, the world’s top oil consumer.
Prices were also boosted after data from China showed that factory activity grew at its fastest this year in May.
Brent crude futures for August gained $1.60, or 2.3%, to reach $70.92 a barrel by 9.11am GMT. US West Texas Intermediate crude for July was at $68.32 a barrel, up $2, or 3% from Friday’s close, with no settlement price for Monday because of a US public holiday.
Brent earlier hit a session-peak of $71, the highest intraday price since March 8.
“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 US and parts of Europe,” analysts from ING Economics said in a note on Tuesday.
Tracking firm GasBuddy said Sunday’s US petrol demand coinciding with the Memorial Day weekend 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 output is expected to hit the market.
Oil cartel Opec and its allies — known as Opec+ — are likely to agree to continue to slowly ease supply curbs at a meeting on Tuesday, Opec sources said, as producers balance an expected recovery in demand against a possible increase in Iranian output.
“There are no signs of division within the group and we expect it to hold on to a steady course with very good control of the market,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.
Opec+ decided in April to return 2.1-million barrels per day (bpd) of supply to the market from May to July, as it anticipated global demand would rise despite a very high number of coronavirus cases in India, the world’s third-largest oil consumer.
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