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Oil

Brent prices hit $71, highest since March, on demand prospects

Published: Updated:

Oil prices rose on Tuesday, with Brent hitting $71 and trading at its highest since March, as expectations grew for increased fuel demand during the summer driving season in the United States, the world’s top oil consumer.

Prices were also boosted after data from China showed that factory activity grew at its fastest this year in May.

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Brent crude futures for August gained $1.60, or 2.3 percent, to reach $70.92 a barrel by 0911 GMT. US West Texas Intermediate crude for July was at $68.32 a barrel, up $2, or 3 percent from Friday’s close, with no settlement price for Monday because of a US public holiday.

Brent earlier hit a session-peak of $71, the highest intra-day price since March 8.

“While there are concerns over tighter COVID-19 related restrictions across parts of Asia, the market appears to be more focused on the positive demand story from the US public holiday and parts of Europe,” analysts from ING Economics said in a note on Tuesday.

Tracking firm GasBuddy said Sunday’s US gasoline demand coinciding with the Memorial Day weekend jumped 9.6 percent above the average of the previous four Sundays, the highest Sunday demand since the summer of 2019.

The price gains were capped, though, as more output is expected to hit the market.

The Organization of the Petroleum Exporting Countries and its allies -- known as OPEC+ -- are likely to agree to continue to slowly ease supply curbs at a meeting on Tuesday, OPEC sources said, as producers balance an expected recovery in demand against a possible increase in Iranian output.

“There are no signs of division within the group and we expect it to hold on to a steady course with very good control of the market,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.

OPEC+ decided in April to return 2.1 million barrels per day (bpd) of supply to the market from May to July, as it anticipated global demand would rise despite a very high number of coronavirus cases in India, the world’s third-largest oil consumer.

Read more: OPEC+ likely to stick with current supply plan at meeting, sees orderly Iran return