Oil hit a 32-month high in early morning trading on Monday as the pace of Covid-19 vaccination programmes picks up globally and countries reopen economies.
Brent, the international benchmark for more than half of the world’s crude, rose by 0.83 per cent to $73.29 a barrel at 7.35pm UAE time. West Texas Intermediate, the key gauge for US oil, was up 0.72 per cent at $71.42 a barrel.
“Benchmark crude oil futures opened buoyant in Asia [on] Monday with carry-over strength from the previous week,” said Avtar Sandu, senior manager of commodities at Singapore's Phillip Futures.
Oil prices are finding support “after the International Energy Agency on Friday predicted that global oil demand will recover to pre-pandemic levels by late 2022”, he said.
Demand for crude is expected to grow by 5.4 million barrels per day this year and a further 3.1 million bpd next year, the agency said.
Opec also left its outlook for global demand growth unchanged for the second consecutive month as movement restrictions are eased.
Demand is expected to grow by 6 million bpd, with total consumption expected to hit 96.6 million bpd this year, Opec said in its monthly oil markets report last Thursday.
The oil demand of Organisation for Economic Co-operation and Development countries is expected to increase by 2.7 million bpd this year, led by the US as it continues to recover from the pandemic, according to the Opec report.
Non-OECD oil demand is set to rise by 3.3 million bpd, with China taking the lead.
Gross domestic product growth rates in the second half of the year are forecast to significantly exceed first-half figures, said Mr Sandu.
“The ongoing fiscal stimulus in the US, amounting to almost $3 trillion, or more than 3 per cent of global GDP, is one very important supporting factor, as well as China’s effort to push its economy forward.”
Earlier this month, the OECD revised its global economic growth forecast for this year to 5.75 per cent and for 2022 to 4.5 per cent after output shrunk by 3.5 per cent last year. The International Monetary Fund also raised its 2021 global outlook in April to 6 per cent.
Vaccination programmes around the world are picking up pace and more than 2.35 billion doses had been administered in 178 countries as of Monday, according to data collected by Bloomberg.
Iraq’s oil minister Ihsan Abdul Jabbar expects crude to trade in the range of $68 to $75 a barrel in the second half of this year.
Crude prices will remain in this range if Opec and its allies continue to cut production to support markets, Mr Jabbar said on Saturday.
The announcement by the Group of Seven high-income countries of plans to donate 1 billion Covid-19 doses over the next year is also a bullish signal for oil demand recovery, according to Louise Dickson, an oil market analyst at Norway’s Rystad Energy.
“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” she said.
Heavy maintenance seasons at different oilfields in Canada and the North Sea are also helping to keep prices high.
Rystad Energy said more than 330,000 bpd of oil and condensate supply is expected to be taken offline at Canada's oil sands this month due to maintenance works.
Demand for jet fuel is also set to increase as countries reopen borders, according to a report by Kuwait’s Kamco Invest.
Earlier this month, Opec and its allies voted to stick with the current plan to bring back 2 million bpd in output to the market, despite the prospect of a resumption of Iranian exports if sanctions are lifted.
“As the [global] economy continues to recover, Opec and its allies will need to increase supply to meet the surge in consumer demand,” said Naeem Aslam, chief market analyst at AvaTrade.
“Having said that, traders should keep in mind that the ongoing nuclear deal negotiations between the US and Iran are likely to take effect soon. Iran is in a strong position to increase its oil supply in a relatively short period of time, which could result in a significant retracement of global oil prices.”
