Picture: 123RF/PIX NOO
Picture: 123RF/PIX NOO

New York — Oil prices reached their highest in more than two years on Tuesday, buoyed by expectations that demand will recover rapidly in the second half of 2021.

Brent crude, the global was up 77c at $73.63/bbl a barrel by 3.19pm GMT after earlier reaching $73.90, its highest since April 2019.

US oil rose 86c, to $71.74/bbl. Earlier it touched $72.03, its highest since October 2018.

“With supply growth lagging demand growth in the near term, faster falling oil inventories are supporting oil prices,” said UBS analyst Giovanni Staunovo. Comments on Tuesday from some of the world's top oil traders added to the bullish mood, he said.

The head of trading house Vitol sees oil prices moving between $70-$80/bbl Opec and its allies (Opec+) are forecast to maintain supply discipline. “We have had those stock draws for a couple months, the market is heading in the right direction,” Russell Hardy told the FT Commodities Global Summit.

Trafigura CEO Jeremy Weir told attendees at the same event there was a good chance prices could reach $100/bbl because of falling reserves before the world reaches peak oil demand.

Opec+ producers have been gradually relaxing record output curbs in recent months.

“The decision by Opec+ to be overly cautious in returning supply to the market, whether this is true caution or they are intentionally stoking oil prices higher, has been a main tenant in seeing $73 per barrel Brent,” said Louise Dickson, an oil markets analyst at Rystad Energy.

Analysts surveyed Reuters expect US crude stocks to have fallen for a fourth week in a row, dropping by about 3m bbl last week. Industry data is due later on Tuesday, followed by official figures on Wednesday morning. {EIA/S]

Investors and traders are also watching the outcome of the two-day US Federal Reserve meeting that started on Tuesday for signals on when it will start to scale back monetary stimulus.

The Fed is getting ready to debate how and when to start tapering a massive asset-purchase programme that helped to support the US economy during the Covid-19 pandemic.

Reuters

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