Crude extends gains on OPEC+ supply discipline

Oil likely to move well beyond $70 a barrel towards mid-year, says analyst at Baer Rucker

FE Team | Published: June 02, 2021 21:51:16

Crude oil rose on Wednesday, supported by an OPEC+ decision to stick to its plan to restore supply to the market gradually and by the slow pace of nuclear talks between Iran and the United States, reports Reuters.
Brent rose 84 cents, or 1.2 per cent, to $71.09 per barrel at 1011 GMT on the day. U.S. West Texas Intermediate (WTI) crude was up 69 cents, or 1.9 per cent, at $68.41.
"The strong demand dynamics and likely delays in the Iran nuclear deal negotiations pushed oil prices above the much-watched $70 per barrel level," said Norbert Rucker, analyst at Swiss bank Julius Baer.
"We expect oil prices to move well beyond $70 per barrel towards mid-year," Rucker said.
Expecting a recovery in demand, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, agreed on Tuesday to keep to their plan for a gradual easing of supply curbs through July.
The OPEC+ meeting took only 20 minutes, the shortest in the group's history, indicating the unity among its members and their confidence in the market's recovery, analysts said.
Saudi Energy Minister Prince Abdulaziz bin Salman said there has been solid demand recovery in the United States and China and he believes that the pace of COVID-19 vaccine rollouts can only lead to further rebalancing of the global oil market.
"The market is optimistic that growing summer travel and reopening economies will easily accommodate additional OPEC+ production increases and even a possible Iranian return to the market," said Stephen Brennock of oil broker PVM.
Analysts also say that the slow progress of Iran nuclear talks provides breathing room for demand to catch up before Iranian oil returns to the market.
Diplomats said the meeting will wrap up the latest round of talks and adjourn discussions for at least a week. "The delay is pushing the threat of another 2.0 million barrels per day of oil (returning to the market) to later in the year, when further economic growth should buffer its impact," ANZ Research analysts said in a note.
OPEC Secretary General Mohammad Barkindo also played down any potential disruption to the market, saying the group expected any return of Iranian exports to "occur in an orderly and transparent fashion" if and when a nuclear deal is reached.
Investors will also be on the lookout for weekly inventory data from the American Petroleum Institute (API), due later on Wednesday, and from the U.S. Energy Information Administration (EIA) on Thursday.