Melbourne — Oil prices rose on Wednesday after oil cartel Opec and its allies stuck to their plan to cautiously return oil supply in June and July while expecting fuel demand to rebound strongly during the US summer.
US West Texas Intermediate (WTI) crude futures rose 32c, or 0.5%, to $68.05 at 2.01am GMT, extending a 2.1% gain after the Memorial Day holiday in the US on Monday. Prices rose to their highest since October 2018.
Brent crude futures climbed 37 cents, or 0.5%, to $70.62 a barrel, after jumping 1.3% overnight, when it hit its highest since March 8.
Opec and its allies, together called Opec+, agreed on Tuesday to keep to their plan to gradually ease supply curbs during July.
Saudi energy minister Prince Abdulaziz bin Salman’s comments after the meeting buoyed the market, saying he saw a solid demand recovery in the US and China, the world’s two biggest oil consumers, and added that the pace of vaccine rollouts “can only lead to further rebalancing of the global oil market.”
“The market appears focused on the more constructive outlook for later this year, with Opec+ of the view that the market will see significant stock drawdowns between September and the end of the year,” ING Economics analysts said in a note.
Including extra cuts by Saudi Arabia tapering off through July, the producer group will be returning 700,000 barrels a day (bbl/day) in June and 840,000bbl/day in July, ING said.
Market gains over the past two weeks have been capped by concerns about a potential lifting of oil sanctions against Iran, as talks on reviving a nuclear accord made progress, however negotiations hit a roadblock this week.
Two Western diplomats and an Iranian official said the talks would likely pause on Thursday, but it was unclear if talks would resume before Iran’s June 18 presidential election.
“The delay is pushing the threat of another 2-million barrels a day of oil [returning to the market] to later in the year, when further economic growth should buffer its impact,” ANZ Research analysts said in a note.
Opec secretary-general Mohammad Barkindo played down any potential disruption to the market, saying the group expected any return of Iranian exports “will occur in an orderly and transparent fashion” if and when a nuclear deal is reached.