Oil prices rise on expectations about European fuel demand

London  Oil prices gained for a second day on Thursday after drawdowns in US inventories and accelerating German economic activity bolstered confidence in the fuel demand recovery.

Doubts about the future of the 2015 Iran nuclear deal that could end US sanctions on Iranian crude exports further supported prices.

Brent crude futures rose 45c, or 0.6%, to $75.64 a barrel by 8.47am GMT, after increasing 0.5% on Wednesday.

US West Texas Intermediate (WTI) crude futures climbed 40c, or 0.54%, to $73.48 a barrel, after rising 0.3% on Wednesday.

Both benchmarks hit their highest since October 2018 on Wednesday, but pared gains later in the session as energy traders locked in profit after the US inventory report, Edward Moya, senior market analyst at brokerage Oanda, said in a report.

Further stoking expectations of a European fuel demand recovery, data from Germany showed the largest upward leap in retail conditions since German reunification more than three decades ago.

Across the Atlantic, US crude inventories fell by 7.6-million barrels in the week to June 18 to 459.1-million barrels, their lowest since March 2020, the US Energy Information Administration said. The drawdown was nearly double analysts’ expectations in a Reuters poll for a 3.9-million-barrel drop.

US petrol stocks fell by 2.9-million barrels in the week, against analysts’ expectations for an 833,000-barrel rise.

“The data was encouraging since not only crude stocks, but also [petrol] inventory dropped, suggesting healthy demand and tight supply,” said Tetsu Emori, CEO of Emori Fund Management.

“Unless Opec+ decides next week to increase output more than expected for August and later, oil prices are expected to stay at the current high range for a while,” he said.

Oil cartel Opec+, which meets on July 1, has been discussing a further unwinding of 2020’s record output cuts from August but no decision has been made, two Opec+ sources said on Tuesday.

Brent has gained more than 45% in 2021 on supply cuts led by Opec+ and recovering demand as Covid-19 restrictions are eased. Some industry executives have talked of crude returning to $100 a barrel for the first time since 2014.

Iran said on Wednesday the US had agreed to remove all sanctions on Iran’s oil and shipping but Washington said “nothing is agreed until everything is agreed” in talks to revive the 2015 Iran nuclear deal.

Reuters