Crude benchmarks recover above $70 per barrel amid demand recovery

Prices had fallen earlier this week after a report from the EIA indicated a higher build-up of stocks

A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas. Opec set demand growth forecast for crude at almost 6 million bpd for 2021. REUTERS

Oil prices shrugged off losses and recovered to trade above $70 per barrel on Thursday as markets brace for higher demand even as producers prepare to increase supply.

Brent, the international benchmark, was up 0.89 per cent to trade at $72.82 per barrel at 3.56pm UAE time. West Texas Intermediate, which tracks US crude grades, was up 0.90 per cent to trade at $70.93 per barrel.

Prices, which had fallen after a report from the US Energy Information Administration indicated a higher build-up of stocks, have recovered since then as the markets factor in continued demand from a recovering global economy.

"Some soft spots have emerged in the oil demand recovery, but this is unlikely to change the outlook fundamentally," Morgan Stanley said in a note on Thursday.

Oil prices buckled during trading sessions earlier this week anticipating potential future supply from Opec+ and as concerns mounted over a fast-spreading Delta strain of Covid-19. The crude benchmarks plunged by nearly 6 per cent during the first trading session after Opec+ agreed to gradually bring supply back into the markets.

However, global demand for crude is expected to outstrip incoming supply, the bank added.

"In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect Opec to remain cohesive," Morgan Stanley said.

Crude prices are likely to continue their rise over the long term as mobility restrictions ease and demand for energy rises.

"Oil is enjoying another day in the green, with WTI firmly back above $70 and the mid-July malaise seemingly behind us," said Craig Erlam, senior market analyst, UK and Emea, at Oanda.

"To climb back above $70 so rapidly after Monday's sell-off was impressive and says a lot about how traders view the dips, something that can be applied more broadly to risk assets," he added.

Earlier this month, Opec maintained its demand growth forecast for crude at almost 6 million bpd for 2021, leaving the estimate unchanged in its July report for the third consecutive month.

Total global oil demand is set to reach 96.6 million bpd, the group said in its latest monthly market report.