Oil prices rise on signs of recovery and better demand for energy

London — Oil prices rose on Wednesday on signs of a speedy economic recovery and upbeat predictions for energy demand in light of progress with vaccinations against Covid-19, though waves of infections in India and Brazil weighed on gains.

Brent crude climbed 18c, or 0.3% to $68.73 a barrel at 8.46am GMT. US West Texas Intermediate (WTI) crude rose 20c, or 0.3%, to $65.48.

The International Energy Agency (IEA) said in its monthly report that demand for oil will exceed the output of the top producers.

“The anticipated supply growth throughout the rest of this year comes nowhere close to matching our forecast for significantly stronger demand beyond the second quarter,” the IEA said.

Oil prices were also supported by the outlook from oil cartel Opec, which, on Tuesday, stuck to a forecast for a strong recovery in world oil demand in 2021, with growth in China and the US outweighing the impact of the coronavirus crisis in India.

Data from the American Petroleum Institute industry group showed that US crude oil stocks fell by 2.5-million barrels in the week to May 7, two market sources said, representing a slightly lower than expected decline.

The drawdown came before the Colonial Pipeline was hit by a cyberattack last Friday, forcing the shutdown of a pipeline that transports more than 2.5-million barrels of fuel a day.

Petrol stations from Florida to Virginia began running out of fuel on Tuesday as drivers rushed to top up their tanks, sending pump prices soaring.

US unleaded petrol prices hit an average $2.99 a gallon (3.78l), the highest since November 2014, the American Automobile Association said.

“While a prolonged outage would be supportive for refined product prices, it could start to weigh on crude oil prices if refiners on the US Gulf Coast are forced to reduce run rates due to a build-up of refined product inventories,” ING analysts said.

Colonial Pipeline has said it hopes to restart a large portion of the network by the end of the week.

Oil also found support from positive economic data in the UK. All eyes will be on US consumer price data for April, due later in the day. Numbers for Germany and France were largely in line with estimates. 

Reuters