Oil retreats but heads for third weekly rise on demand recovery

Saudi Arabia will supply full volumes of July-loading crude to its Asian customers

Oil prices slipped on Friday but were set for their third weekly rise on expectations for a recovery in fuel demand in Europe, China and the United States as rising vaccination rates lead to an easing of pandemic curbs.

Brent crude futures fell 16 cents, or 0.22 per cent, to $72.36 a barrel at 5.58am GMT, after closing at its highest since May 2019 on Thursday.

US West Texas Intermediate (WTI) crude futures slipped 9 cents, or 0.13 per cent, to $70.20 a barrel, after climbing 0.5 per cent on Thursday to its highest close since October 2018.

Brent is set for a weekly rise of 0.7 per cent while WTI is set to gain 0.8 per cent.

Saudi Arabia, the world’s top oil exporter, will supply full volumes of July-loading crude to its Asian customers, Reuters reported on Friday citing sources.

“News that Saudi Arabia has unwound all its voluntary production cuts are circulating in Asia today, and that appears to have temporarily pushed oil prices lower,” Jeffrey Halley, senior market analyst at OANDA, wrote in a note.

“The reaction is modest, though, and if anything, the price action is bullish. It suggests that the physical market has absorbed extra Saudi production with ease and that demand globally is robust and climbing.”

Gasoline inventories in the United States, the world’s biggest oil consumer, rose by 7 million barrels in the week to June 4th, and distillate stockpiles rose by 4.4 million barrels, both much more than analysts had expected, according to data from the US Energy Information Administration on Wednesday.

That unexpected surge spurred profit-taking activity as prices hit a two-and-half year high, said Margaret Yang, a strategist at DailyFX.

Additionally, 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 per cent over the past two weeks, according to Eurocontrol,” ANZ analysts said.

The Organisation of the Petroleum Exporting Countries (OPEC) reinforced the view of healthy demand, sticking to its forecast that demand in 2021 would rise by 5.95 million barrels per day, up 6.6 per cent from a year earlier.

“Overall, the recovery in global economic growth, and hence oil demand, are expected to gain momentum in the second half,” OPEC said in its monthly report on Thursday. – Reuters