DUBAI: Brent crude surged past the $75 mark for the first time in more than two years, as signs grew of a sustained recovery in post-pandemic demand.
The global benchmark hit $75.93 per barrel and analysts expect the recent exuberance in crude to continue, with Bank of America (BoA) becoming the latest big financial institution to forecast $100 per barrel in the near future.
“There is plenty of pent-up demand waiting to be unleashed,” said Francisco Blanch, BoA’s head of commodities research. Brent was last above $100 in 2014.
A big boost to demand is coming from the US, where car travel and domestic flying are almost back to pre-pandemic levels. US inventories — storage of oil that built up during the pandemic lockdowns — are being drained quickly.
West Texas Intermediate, the US benchmark that most reflects national demand, has also leapt in price recently, rising above $73 per barrel as US consumers start to travel again for summer vacations.
Figures from the US Energy Information Administration showed that a further 7.5 million barrels were drained from US storage last week.
The rise in crude demand comes ahead of a key meeting next week of members of the OPEC+ alliance of oil producers, led by Saudi Arabia and Russia, which is expected to give some indication of how much extra supply will be put on global markets for the rest of the year.
HIGHLIGHTS
• Figures from the US Energy Information Administration showed that a further 7.5 million barrels were drained from US storage last week.
• At $75, US shale producers might consider it viable to pump again, adding to the growing global pool.
Although output for the month of July is already set according to an agreement reached in April, markets will be looking for signs of how much capacity OPEC+ will release for the rest of 2021.
Officials said that talks about fresh supply were ongoing, but no decision on exact amounts had been reached ahead of the meeting of energy ministers on July 1.
Saudi Arabia remains cautious about new supply and concerned that new variants of the COVID-19 virus could force some countries back into lockdowns. Russia is believed to want a significant boost to production for the remainder of the year, beginning in August.
Some analysts fear a new glut of crude if Iran reaches a deal on its nuclear policy and export restrictions are lifted, but any big increase is likely to be many months away.
At $75, US shale producers — which have been largely forgoing new drilling for the past year — might consider it viable to pump again, adding to the growing global pool.
Oil industry expert Daniel Yergin told Arab News recently that he saw signs of “modest growth” returning to US shale markets.
