Oil steady near highest since 2018 with Saudis upbeat on demand

Oil was steady after closing at the highest since October 2018 as OPEC+ provided an upbeat assessment of the demand outlook and the prospect of a speedy return of Iranian barrels to the market waned.

Futures in New York inched higher, while Brent rose 0.3 per cent after settling above $70 a barrel on Tuesday for the first time since 2019. Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said demand “has shown clear signs of improvement” as the alliance ratified an output boost for July. His Russian counterpart also spoke of the “gradual economic recovery.”

Adding further support to the market was an indication that talks to revive a 2015 nuclear accord with Iran has been delayed for now. An Iranian official said a deal is now expected to be finalised in August.

Oil is up 40 per cent this year as the recovery from the pandemic in the US, China and parts of Europe boosts the outlook for fuel consumption, despite a Covid-19 resurgence in countries such as India. Global demand may rebound to levels seen before the outbreak in a year, according to the International Energy Agency, signaling a quicker comeback than its previous estimates.

“Sentiment is clearly supportive with the demand recovery that we are seeing in the US and Europe,” said Warren Patterson, head of commodities strategy at ING Group in Singapore. Oil demand is likely to be at around 98 per cent of pre-Covid-19 levels by the end of this year, he added.

Prices

• West Texas Intermediate for July rose 0.2 per cent to $67.86 a barrel on the New York Mercantile Exchange at 12.08pm Singapore time after surging 2.1 per cent in the previous session.
• Brent for August settlement climbed 19 cents to $70.44 on the ICE Futures Europe exchange after gaining 1.3 per cent on Tuesday.

The market continues to firm in a bullish structure. Brent’s prompt timespread was 41 cents in backwardation — where near-dated prices are more expensive than later-dated ones. That compares with 9 cents at the start of last week.

OPEC+ ministers agreed Tuesday to press ahead with an increase of 841,000 barrels a day in July after hikes in May and June, although the group didn’t give any hints on future supply moves. There’s reason to be cautious about the second half of the year, with the outlook dependent on two hard-to-predict factors: the coronavirus and nuclear talks between Iran and the US.

Diplomats had hoped to restore the nuclear deal before Iran’s June 18 presidential elections. An agreement is expected to result in a lifting of US sanctions and an increase in Iranian oil exports, although there are varying estimate on how much crude could return to the market.