Oil prices extend gains as supply outlook remains tight
Opec+ deal to increase crude output from August unlikely to change fundamental scenario for 2021, analysts say
London — Oil prices rose on Thursday, extending the strong gains made in previous sessions on continued expectations of tighter supplies until the end of the year as economies recover from the coronavirus crisis.
Brent crude rose 27c, or 0.4%, to $72.50 a barrel at 8.30am, adding to the 4.2% gain in the previous session. US West Texas Intermediate crude rose 33c, or 0.5%, to $70.63/bbl after rising 4.6% on Wednesday.
“Some soft spots have emerged in the oil demand recovery, but this is unlikely to change the outlook fundamentally,” Morgan Stanley said in a note.
Members of Opec and other producers including Russia, a group known as Opec+, agreed this week to boost daily oil supply by 400,000 barrels from August to December to cool prices and meet growing demand.
But demand is still set to outstrip supply in the second half, leading Brent prices to trade in the mid- to high-$70s/bbl for the remainder of 2021, Morgan Stanley said.
“In the end, the global GDP recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 [the second half of 2021] and we expect Opec to remain cohesive,” it said.
Crude inventories in the US, the world’s top oil consumer, rose unexpectedly by 2.1m bbl last week to 439.7m bbl, up for the first time since May, according to US Energy Information Administration data.
The most relevant risk to market fundamentals remains a deterioration of demand due to new virus restrictions, Citi analysts said.
“Only a really tremendous demand shortfall would tip the market balance into a surplus,” they added.
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