Oil futures: Prices surge higher on strong fundamentals, Brent above $76/b

13 Jul 2021

Quantum Commodity Intelligence – Crude oil futures soared to intraday highs in late-London trading Tuesday, amid a renewed technical rally underpinned by the latest IEA report showing a surge in demand last month, the OPEC stand-off and expectations for another draw in US crude inventories.

Front-month September Brent futures were trading at $76.45/barrel (1657 GMT), having hit a session low of under $75/b earlier, and well ahead of Monday’s settle of $75.16/b.

At the same time, August WTI was trading at $75.23/b, up from its settle of $74.10/b on Monday.

"Oil prices are on the rise today as a result of the anticipation of data confirming a bullish trend of crude inventory draws in the US. They could get further support if the API’s forecasts also match the expectation later today," said Louise Dickson of Rystad Energy.

As official inventory data will come tomorrow, another confirmed large draw would further prove the recovery of refinery demand in the US, and cement even more the strong price levels, a needed support for bulls as some clouds of uncertainty are ahead.

Amid volatile trading Tuesday, prices rallied after the IEA reiterated a warning that oil markets will “tighten significantly” unless OPEC+ can find a compromise and resolve the current stalemate over production levels.

The Paris-based energy watchdog said global oil demand surged 3.2 million bpd in June from May to reach 96.8 million bpd.

Prices later retreated on US inflation figures prompting interest rate rise fears, but with little sign of a breakthrough between the UAE and Saudi Arabia in the row over OPEC+ quotas, price resumed the upwards trend.

JP Morgan warned the deadlock on a deal to increase oil output from August could last into next month, prompting further prices increases.

Wednesday’s IEA data is expected to show further falls in US oil stocks, according to market surveys.