Brent neared $70 a barrel and West Texas Intermediate climbed for a third day. Gasoline futures surged to the highest since July 2018.
The American Petroleum Institute reported crude supplies fell by 7.69 million barrels last week, according to people familiar with the data. If confirmed by government figures on Wednesday, that would be the largest drop since late January. The API report also showed lower gasoline and distillate inventories.
Aiding the outlook for improved oil consumption, the U.S. is setting a new target of 70% of U.S. adults receiving at least one Covid-19 vaccine shot by July 4, while British Prime Minister Boris Johnson said his country’s lockdown rules will be scrapped in seven weeks. That’s offsetting concerns about weaker demand in parts of virus-hit Asia, including key importer India.
Brent has soared by more than a third this year, part of a broad rally across raw materials that’s driven the Bloomberg Commodity Spot Index to the highest level in almost a decade. Investors are betting that rising vaccine-aided demand and greater mobility in key economies will drain crude stockpiles and support higher prices. That’s meant oil has extended gains in recent weeks even amid the serious virus flare-ups in Asia.
“The oil market is making fresh headway into positive territory amid expectations for hefty drawdown in U.S. oil stocks,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Brent’s pricing patterns reflect the overall bullishness, with near-term contracts above those further out. The December 2021 contract was as much as $5 more costly than the same month in 2022, a market structure that indicates tightness and suggests traders are betting on a further rally.
While the U.S. and Europe are charting a course for reopening, the Covid-19 crisis in India may yet worsen, with some research models projecting the death toll could more than double. The nation’s oil imports may tumble by more than 1 million barrels a day to 3.1 million in the coming weeks, according to Kpler.