Oil futures: Brent rises 1% to $75.50/b, WTI to $73.10 on demand optimism

29 Jul 2021

Quantum Commodity Intelligence – Crude oil futures rose in afternoon London trade Thursday, continuing its upward momentum on growing demand optimism, a softer dollar and last week’s drawdown in US oil inventories.

Front-month September Brent futures were trading at $75.52/barrel (1508 GMT), up around 1% on Wednesday’s settle of $74.74/b and close to the day’s peak of $75.55/b, which was in itself a two-week high.

At the same time September WTI was trading $73.09/b, versus Wednesday’s settle of $72.39/b and off its intra-day high of $73.27/b.

Prices eased slightly after the release of US economic data showing lower-than-expected growth in the second quarter, but the news was largely shrugged off by the oil market. 

GDP advanced 6.5% on an annualised basis versus expectations of around 7%, as strong consumption was offset by lagging private investment, softening the dollar to help boost crude futures.

The US Energy Information Administration said stocks fell 4.1 million barrels for crude and 2.25 million for gasoline in the week ending July 23.

The latest data confirms the trend that has seen inventories drop to pre-pandemic levels, a key goal of the OPEC+ producer group.  

“US crude oil stocks have declined by more than 60 million barrels since the end of March, and are 3.4% below the average level of the years 2015-19,” noted Commerzbank. 

The German bank also noted: “the renewed sizeable inventory reduction by 1.3 million barrels at Cushing, putting stocks there 29% below the 2015-19 average.”

Elsewhere, stocks of middle distillates in Singapore fell to an 18-month low of 10.8 million barrels, according to data from Enterprise Singapore Thursday, down 400,000 barrels on the week to 20% below the average so far this year

Meanwhile, the Oxford Institute for Energy Studies said fundamentals remain solid and demand will likely grow by 5.6 million bpd in 2021 and a further 3.3 million bpd in 2022.

The report also said the OPEC+ producer group will struggle to fully return to previous supply levels, while shale production growth will continue at a modest rate.

“Few countries are in a position to meet their quotas. Considering implied production capacity and maximum historical production levels sustained over a period of 3-6 months, we estimate that OPEC+ can return only 4.5 million bpd of restrained supplies, 1.2 million bpd below target.”