Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base
Oil prices edged up to fresh four-week highs on Thursday on positive U.S. economic data and higher demand forecasts from the International Energy Agency (IEA) and OPEC as countries start to recover from the COVID-19 pandemic.
After rising almost 5% on Wednesday, Brent futures rose 36 cents, or 0.5%, on Thursday to settle at $66.94 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 31 cents, or 0.5%, to settle at $63.46.
That was the highest closes for both benchmarks since March 17 for a second day in a row and put both contracts up for a fourth straight day for the first time since February.
“Oil is beginning to reconnect with strong equities with further assistance from a weakening dollar,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
U.S. retail sales rebounded more than expected in March as Americans received additional pandemic relief checks and as COVID-19 vaccinations allowed broader economic re-engagement.
The U.S. dollar (.DXY) was on track to fall to a four-week low against a basket of currencies. A weaker dollar makes oil cheaper for holders of other currencies, which traders said helps support crude prices.
“Wednesday’s gains were a bit excessive, but they were built on valid grounds, as several high-profile reports forecasted demand growth for the second part of the year and as crude stocks in the U.S. surprised traders with quite significant draws,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
“Today the market is holding on to these gains, only cutting down on the froth from this week’s enthusiasm,” Tonhaugen said.
The IEA and the Organization of the Petroleum Exporting Countries this week made upward revisions to their global oil demand growth forecasts for 2021 to 5.7 million barrels per day (bpd) and 5.95 million bpd respectively.
U.S. crude inventories (USOILC=ECI), meanwhile, fell 5.9 million barrels last week, government data showed on Wednesday, with East Coast crude stocks falling to a record low.
Supply discipline and rebounding economies are set to give oil a chance to break out of the recent range, analysts at Goldman Sachs said in a report.
“We remain positive on Brent oil forecasting $80 (per barrel in the third quarter) on a near-term demand recovery and supply discipline,” the bank said.
Despite all the bullish economic news, some energy traders noted oil price gains will likely be capped by OPEC’s plans to ease production cuts starting next month.
OPEC and its allies, including Russia, a group known as OPEC+, agreed to bring back about 2 million barrels per day (bpd) of production over the next three months.
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