US oil hits US$70 for first time since 2018 on global demand recovery hopes

Optimism around rising fuel consumption is growing as the US, China and Europe rebound strongly from the pandemic.
Optimism around rising fuel consumption is growing as the US, China and Europe rebound strongly from the pandemic.PHOTO: REUTERS

NEW YORK (BLOOMBERG, REUTERS) - Oil in New York hit US$70 a barrel for the first time since October 2018 as upbeat comments on the market from major trader Vitol Group added to optimism over the global demand recovery.

West Texas Intermediate (WTI) futures for July climbed as much as 0.6 per cent during early trading on Monday (June 7) after posting a second straight weekly gain. They were at US$69.91 a barrel, up 29 cents, or 0.4 per cent, by 0107 GMT.

Brent crude futures for August rose 28 cents, or 0.4 per cent, to US$72.17 a barrel, their highest since May 2019.

Both contracts have risen for the past two weeks as fuel demand is rebounding in the United States and Europe after governments loosened Covid-19 restrictions ahead of summer travel.

Opec+ appears in control of crude prices, with US production lagging pre-pandemic levels, Mr Mike Muller, Vitol's head of Asia, said at a conference on Sunday. The alliance is returning supply after output cuts helped to tighten the market.

Oil is in "strong demand right now", with economies around the world opening up, Mr Daniel Yergin, the oil historian and vice-chairman at IHS Markit, told Bloomberg Television last week. Optimism around rising fuel consumption is growing as the US, China and Europe rebound strongly from the pandemic.

Global oil demand is expected to exceed supplies in the second half despite a gradual easing of supply cuts by Opec+ producers, analysts say.

A slowdown in talks between Iran and global powers in reviving a 2015 nuclear deal and a drop in US rig count also supported oil prices.

Iran and global powers will enter a fifth round of talks on June 10 in Vienna that could include Washington lifting economic sanctions on Iranian oil exports.

While the European Union envoy coordinating the negotiations had said he believed a deal would be struck at this week's talks, other senior diplomats have said the most difficult decisions still lie ahead.

Analysts expect Iran to increase its production by 500,000 to one million barrels a day once sanctions are lifted.

In the United States, the number of oil and natural gas rigs operating fell for the first time in six weeks as growth in drilling slowed.