Oil rises on optimism of quick recovery in global demand

Crude oil prices rose on Tuesday, with Brent hitting $75 a barrel for the first time since April 2019, as investors remained bullish about a quick recovery in global oil demand and as concerns eased over an early return of Iranian crude.

Brent crude futures for August climbed 29c, or 0.4%, to $75.19 a barrel by 0658 GMT, paring earlier losses. It rose as high as $75.27 a barrel, the strongest since April 25, 2019, earlier in the session.

US West Texas Intermediate (WTI) crude for July was at $73.66 a barrel, unchanged from the previous session. WTI for August climbed 13c, or 0.2%, to $73.25 a barrel.

Brent gained 1.9% and WTI jumped 2.8% on Monday.

Both benchmarks have risen for the past four weeks on optimism over the pace of global Covid-19 vaccinations and expected pickup in summer travel.

“The market sentiment stays strong with improved outlook for global demand,” said Satoru Yoshida, a commodity analyst with Rakuten Securities, adding that a rally in Asian stock markets is also helping boost risk appetite among investors.

Global shares on Tuesday extended their recovery from four-week lows as investors focused on prospects for post-pandemic economic growth, rather than fret more over the hawkish stance taken by the US Federal Reserve at a policy meeting last week.

BofA Global Research raised its Brent crude price forecasts for this year and next, saying that tighter oil supply and recovering demand could push oil briefly to $100 per barrel in 2022.

Investors are looking to weekly US inventory data as crude oil stockpiles have fallen for four weeks, said Toshitaka Tazawa, analyst at commodities broker Fujitomi Co.

US crude stocks were expected to drop for the fifth consecutive week, while distillate and petrol were seen rising last week, a preliminary Reuters poll showed on Monday.

“The oil prices are expected to hold a firm tone amid expectations that fuel demand will pick up quickly along with economic recovery in Europe and the US,” Tazawa said.

The price gap between the world's two most actively traded oil contracts narrowed to its lowest in more than seven months, demonstrating that US oil output is still in the Covid-19 doldrums with the market likely to remain undersupplied.

Negotiations to revive the Iran nuclear deal took a pause on Sunday after hardline judge Ebrahim Raisi won the country's presidential election.

Raisi on Monday backed talks between Iran and six world powers to revive a 2015 nuclear deal but flatly rejected meeting US President Joe Biden, even if Washington removed all sanctions.

“The lower probability of Iranian crude oil returning to the market due to the new hardline president is also supporting the market,” Fujitomi's Tazawa said.

Meanwhile, China has issued 35.24m tonnes of crude oil import quotas to non-state refiners in a second batch of allowances for 2021, a 35% drop from the same slot last year, according to a document seen by Reuters and two sources with knowledge of the matter.