May 8, 2021

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Oil continues to rally as Brent crude approaches $ 70 after lower inventories



An oil storage tank at the Strategic Petroleum Reserve in Freeport, Texas, United States. The American Petroleum Institute reported that crude supplies fell by 7.69 million barrels last week.
Image Credit: Reuters

Dubai: Oil extended its rally after US inventories fell and investors hailed the reopening in the US and Europe which would aid demand.

WTI crude rose 1.2% at the open, the largest number since November 4, and Brent approached $ 70 a barrel, and gasoline futures hit their highest levels since July 2018. The American Petroleum Institute reported that crude supplies fell 7.69 million barrels last week, according to For people familiar with the data. If government figures confirm on Wednesday, it will be the biggest drop since late January. The API report also showed low stocks of gasoline and distillates.

In support of expectations of improved oil consumption, the United States is setting a new target for 70% of American adults who receive at least one Covid-19 vaccine by July 4, while British Prime Minister Boris Johnson said his country’s lockdown rules will be lifted. Seven weeks. This offsets concerns about weak demand in parts of Asia hit by the virus, including India, the main importer.

Raising bets on demand

US futures are up by more than a third this year, as part of a broad rally across raw materials that pushed the Bloomberg Commodity Spot to its highest level in nearly a decade. Investors are betting that increased demand for a vaccine and increased mobility in major economies will drain crude oil inventories and support higher prices. This means that oil has expanded its gains in recent weeks, even amid the dangerous outbreak of the virus in Asia.

“The rally has some momentum behind it,” said Daniel Hines, chief commodities analyst at Australia and New Zealand Banking Group Ltd., adding that crude oil is a large part of the very strong investor appetite for commodities. “The recovery has always been erratic, and we are now starting to see more positive factors, reinforcing hopes for a stronger recovery in demand in the medium term.”

As the United States and Europe chart a course to reopen, the Covid-19 crisis in India could worsen, with some research models predicting the death toll could more than double. The country’s oil imports could drop by more than 1 million barrels per day to 3.1 million in the coming weeks, according to Kepler.

However, Brent pricing patterns reflect the general upside, with short-term contracts higher than those. The immediate spread was 46 cents a barrel, down from 32 cents a month ago. Additionally, the December 2021 contract cost was $ 4.00 more than the same month in 2022.