Oil declines but on track for fifth weekly gain on strong demand

June 26, 2021 00:00:00

FILE PHOTO: Canadian Natural Resources Limited's Primrose Lake oil sands project is seen near Cold Lake, Alberta

Crude oil prices fell on Friday, but remained on track for a fifth consecutive weekly gain on expectations demand growth will outstrip supply and OPEC+ producers will be cautious in returning more supply to the market from August, reports Reuters.

Brent crude was down 27 cents, or 0.4 per cent, at $75.29 per barrel at 1028 GMT on Friday, but was heading for a 2.4 per cent rise on the week.

US West Texas Intermediate (WTI) crude oil fell 30 cents, or 0.4 per cent, at $73.00 a barrel, but was on track for a 1.9 per cent weekly gain.

Both benchmark contracts settled at their highest levels since October 2018 on Thursday.

"Oil prices have been supported in recent weeks, benefiting from the ongoing decline in global oil inventories as oil demand continues to grind higher, although unevenly," said UBS analyst Giovanni Staunovo.

"With larger oil inventory declines ahead, we expect oil prices to keep moving higher during 3Q21," he added, referring to the third quarter of this year.

Oil prices also found support as the approval of a US infrastructure bill boosted optimism over the energy demand outlook, analysts said.

All eyes are on the Organization of the Petroleum Exporting Countries, Russia and allies - together called OPEC+ - who are due to meet on July 01 to discuss further easing of their output cuts from August.

"The producer group has ample space to boost supply without derailing the drawdown in oil stocks, given the rosier demand outlook," said Stephen Brennock of oil broker PVM.

On the demand side, the key factors OPEC+ will have to consider are strong growth in the United States, Europe and China, bolstered by vaccine rollouts and economies reopening, according to analysts who said this was countered by rising COVID-19 cases and outbreaks in other places.

The prospect of sanctions on Iran being lifted and more of its oil hitting the market anytime soon has dimmed, with a US official saying "serious differences" remain over a range of issues over Tehran's compliance with the 2015 nuclear deal.