Oil prices soared on Monday, supported by solid demand during the summer driving season. Besides, the suspension of negotiations to restart the Iran nuclear deal also had influence.
As of 0622 GMT, Brent crude oil in August rose 23 cents, or 0.3%, to US$73.74 per barrel. The price of West Texas Intermediate crude oil in the United States in July was US$71.94 per barrel, up 30 cents or 0.4%.
Due to optimism about the rate of global vaccination and increased summer travel, both benchmarks have risen in the past four weeks. The rebound has pushed up the spot premium of Asian and European crude oil to a multi-month high.
According to ANZ Bank, the northern hemisphere summer demand rebounded strongly. Hence, the market worries about further sharp declines in inventories.
Hard-line judge Ebrahim Raisi won the country’s presidential election. Thus, negotiations to resume Iran’s nuclear deal were suspended on Sunday. Two diplomats said they expected to rest for about ten days.
The election might delay the conclusion of the nuclear agreement because Iran insists on lifting U.S. sanctions on Raisi before an agreement is reached.
An agreement may allow Iran to export an additional 1 million barrels of oil per day from its storage facilities. This will account for 1% of global supply, for more than six months.
Oil Prices Also Derive Support from Forecasts of Limited Growth in U.S. Output
OPEC officials learned from industry experts that despite price increases, U.S. oil production growth may still be limited in 2021. It gives the organization more power to manage the market quickly and then shale oil production.
“We expect strong demand and tight supply,” said Avtar Sandu, an analyst at Phillips Futures. He added that investors are watching the next meeting between OPEC and its allies to understand the supply outlook.
The rising processing rate of U.S. refineries had narrowed WTI’s discount to Brent crude oil to below US$2 per barrel for the first time since November. It restricts U.S. crude oil exports to the global market.
Nevertheless, data from energy services company Baker Hughes shows that the number of oil rigs in the U.S. increased by eight last week to 373, the highest level since April 2020.