Picture: 123RF/EVGENII BASHTA
Picture: 123RF/EVGENII BASHTA

London — Crude oil prices jumped on revised oil demand forecasts on Wednesday despite concerns over rising coronavirus cases and vaccine rollouts.

Brent crude futures rose $1, or 1.57%, to $64.67 a barrel by 8.58am GMT. US West Texas Intermediate (WTI) crude futures were up 96c, or 1.6%, at $61.

“The main price driver this morning is the monthly International Energy Agency (IEA) report that foresees a significant rise in global oil demand in the second half of the year. This will increase demand for oil cartel Opec oil and deplete worldwide and Organisation for Economic Co-operation and Development inventories,” said PVM Oil Associates analyst Tamas Varga.

The IEA has predicted global oil demand and supply are set to rebalance in the second half of the year and that producers may then need to pump an additional 2-million barrels per day (bpd) to meet the expected demand.

Similarly, on Tuesday, Opec raised its global demand forecast by 70,000 bpd from last month’s forecast and now expects global demand to rise by 5.95-million bpd in 2021.

Signs of a strong economic recovery in China and the US have underpinned recent price gains, but stalled vaccine rollouts worldwide and soaring Covid-19 cases in India and Brazil have slowed the market’s advance.

“Continuing setbacks on vaccine rollouts and global virus cases nearing January’s peak is likely to hold a firm cap on crude’s ascent in the short term,” said Vandana Hari, energy analyst at Vanda Insights.

A weakening dollar also “provided a mild upward push” in recent days but there has been “no major bullish impetus to free crude from its narrow trading range”, she said.

The dollar hit three-week lows on Wednesday, making crude cheaper for countries using other currencies.

In addition to the weaker dollar, Iran’s increased uranium enrichment activity was “also somewhat supportive”, ING bank said in a note. The bank said this suggested that a return of the US to the Iranian nuclear deal and any lifting of sanctions is likely to be some way off.

Sources said that data from the American Petroleum Institute (API) showed crude stocks fell by 3.6-million barrels in the week ended April 9. Analysts polled by Reuters had expected a decline of about 2.9-million barrels.

Traders are waiting to see if official inventory data from the US Energy Information Administration (EIA) on Wednesday matches that view. 

Reuters

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.