Still, the oil market continues to display signs of strength as the pandemic ebbs. Russia’s Sokol crude traded at its strongest level since February 2020, while key swaps tied to the North Sea market that prices much of the world’s crude have rallied in recent days.
A U.S. government report Wednesday offered the market its latest bullish fillip, with domestic crude stockpiles sinking as refinery demand picks up. Saudi Energy Minister Prince Abdulaziz bin Salman told a conference that the cautious approach taken by OPEC+ to reviving supply was paying off, indicating that he’s sticking to that position, with the group set to meet July 1 to decide its next steps.
“Dollar strength and lower inflation expectations and a general reduction in risk appetite has for now reduced investment appetite in crude oil,” said Ole Hansen, head of commodities strategy at Saxo Bank. “The oil market is not only driven by fundamentals which are currently supportive, but also financial investors buying oil for other reasons, such as momentum, inflation hedge and dollar plays.”
The outlook remains constructive, according to Citigroup Inc., which said Brent could soon top $80 a barrel. Pent-up leisure demand, enabled by vaccine roll-outs, would underpin global consumption this summer, the bank said in a note.
The market’s pricing patterns remain firm, with near-dated contracts above those further out. Brent’s prompt timespread was 85 cents a barrel in backwardation, more than double the 42 cents seen two weeks ago.
“Keep riding the bull-wave in oil,” said Bjarne Schieldrop, chief commodities strategist at SEB AB. “OPEC+ is holding a steady course keeping the market in the tight side, driving inventories steadily lower while demand keeps rising back toward normal.”