Oil pulled back after hitting fresh multi-year highs on Monday, as investors awaited the outcome of this week’s talks between Iran and world powers over a nuclear deal that is expected to boost crude supplies.
Brent crude futures for August fell 37 cents, or 0.5%, to $71.53 a barrel, after earlier hitting $72.27, their highest since May 2019. U.S. West Texas Intermediate crude for July touched $70 for the first time since October 2018 but retreated to $69.32 a barrel, down 30 cents, or 0.4%.
Investors may have sold off some contracts to take profit when WTI hit $70, said Avtar Sandu, a senior commodities manager at Phillips Futures in Singapore.
“The primary concern is about Iranian barrels coming back into the market but I don’t think there will be a deal before the Iranian presidential election,” he added.
Both contracts have risen for the past two weeks as fuel demand is rebounding in the United States and Europe after governments loosened COVID-19 restrictions ahead of summer travel.
Global oil demand is expected to exceed supplies in the second half despite a gradual easing of supply cuts by OPEC+ producers, analysts say.
A slowdown in talks between Iran and global powers in reviving a 2015 nuclear deal and a drop in U.S. rig count also supported oil prices.
Iran and global powers will enter a fifth round of talks on June 10 in Vienna that could include Washington lifting economic sanctions on Iranian oil exports.
While the European Union envoy coordinating the negotiations had said he believed a deal would be struck at this week’s talks, other senior diplomats have said the most difficult decisions still lie ahead.
Analysts expect Iran, which is having its presidential election on June 18, to increase its production by 500,000 to 1 million barrels per day once sanctions are lifted.
In the United States, the number of oil and natural gas rigs operating fell for the first time in six weeks as growth in drilling slowed.
Crude Oil Rises to $72 a Barrel on Strong Demand Recovery
Oil prices rose on Friday to fresh multi-year highs and were set for their third weekly jump on expectations of a recovery in fuel demand in the United States, Europe and China as rising vaccination rates lead to an easing of pandemic curbs.
Brent crude futures edged up 13 cents to $72.65 a barrel to 1145 GMT, a day after closing at their highest since May 2019.
U.S. West Texas Intermediate (WTI) crude futures were up 14 cents to $70.43 a barrel, a day after their highest close since October 2018.
U.S. investment bank Goldman Sachs expects Brent crude prices to reach $80 per barrel this summer as vaccination rollouts boost global economic activity.
The International Energy Agency said in its monthly report that OPEC+ oil producers would need to boost output to meet demand set to recover to pre-pandemic levels by the end of 2022.
“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” the Paris-based energy watchdog said.
It said that rising demand and countries’ short-term policies were at odds with the IEA’s call to end new oil, gas and coal funding.
“In 2022 there is scope for the 24-member OPEC+ group, led by Saudi Arabia and Russia, to ramp up crude supply by 1.4 million barrels per day (bpd) above its July 2021-March 2022 target,” the IEA said.
Data showing road traffic returning to pre-COVID-19 levels in North America and most of Europe was encouraging, ANZ Research analysts said in a note.
“Even the jet fuel market is showing signs of improvement, with flights in Europe rising 17% over the past two weeks, according to Eurocontrol,” ANZ analysts said.
Crude Oil Rebounds on Thursday After Slipping on U.S Weak Demand
Oil prices rose on Thursday a day after slipping on data indicating weak U.S. driving season fuel demand as investors eyed upcoming U.S. economic data.
Brent crude oil futures were up 18 cents, or 0.25%, at $72.40 a barrel, holding just shy of a high not seen since May 2019.
U.S. West Texas Intermediate oil futures rose 11 cents, or 0.16%, to $70.07 a barrel, staying near its highest since Oct. 2018.
“The market is recovering impressively from yesterday’s dismal weekly EIA report, the drop in weekly gasoline demand was particularly disappointing,” said Tamas Varga, analyst at PVM Oil Associates.
“It will interesting to see whether the monthly OPEC report due out later will confirm last month’s upbeat demand assessment for the second half the year. If it does, as expected, it should support oil prices.”
Varga added that U.S. inflation data and jobless claims would provide more direction on the health of world’s biggest economy and clues as to whether the Federal Reserve might start tapering stimulus.
U.S. crude oil stockpiles that include the Strategic Petroleum Reserve (SPR) fell for the 11th straight week as refiners ramped up output, but fuel inventories grew sharply due to weak consumer demand, the Energy Information Administration (EIA) said on Wednesday.
Crude inventories that exclude the SPR fell by 5.2 million barrels in the week to June 4 to 474 million barrels, the third consecutive weekly drop. But fuel stocks were up sharply, with product supplied falling to 17.7 million barrels per day (bpd) versus 19.1 million the week before.
Implied gasoline demand fell to 8.48 million bpd in the week to June 4, down from 9.15 million bpd from the week before, but up from 7.9 million bpd a year ago, EIA data showed.
Weighing on prices, India’s fuel demand slumped in May to its lowest since August last year, with a second COVID-19 wave stalling mobility and muting economic activity in the world’s third largest oil consumer.
African Countries Needs $15.7B To Upgrade 36 Existing Refineries
Nigeria and other African countries will need about $15.7bn to upgrade the existing 36 refineries on the continent, the African Refiners and Distributors Association has said.
ARDA said the fund would be needed for the refineries to be able to produce petroleum products that would conform to a planned level of sulphur content.
It said in a statement on Thursday that the $15.7 billion would be needed for the engineering, procurement and construction processes for the upgrade of the facilities.
The African Union and ARDA had planned an initiative called AFRI-6, which aimed at reducing sulphur content in fuels to 10 parts per million in the coming years.
In his address at a workshop organised by ARDA with the theme, ‘Upgrading African refineries to produce cleaner fuels,’ the association’s Executive Secretary, Anibor Kragha, said West and Central Africa with 12 refineries would need $6.28bn capital expenditure for refineries upgrade.
He said North Africa with 17 refineries would require capital expenditure of $5.95bn, while East and Southern Africa with seven refineries would need $3.42bn.
Kragha said without urgent steps on adopting uniform fuel specifications across the continent, health and environmental challenges could worsen existing problems on the continent.
“Cleaner, harmonised, pan-African fuels specifications are required and there has been uneven progress in tightening fuel specifications across the continent,” he said.
He said the African Union and ARDA were collaborating on adoption of AFRI Fuels Roadmap and outlined new process units required to improve key fuel specifications.
According to Kragha, the process units include naphtha hydrotreater, diesel hydro-desulphurisation, benzene extraction, sulphur and hydrogen plants.
He said, “Major urban population growth would result in increased pollution. So orderly, sustainable transition to cleaner fuels remained imperative to address potential public health issues.
“Targeted financing is needed for projects to upgrade refineries and infrastructure to produce and transport cleaner fuels.”
On his part, an investment professional at the African Finance Corporation, Ufuoma Adasen, noted that while access to long-term financing at competitive rates remained a challenge, phased project implementation could represent a way forward.
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