Oil prices rise to near multi-year highs on optimism about demand outlook

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Oil prices rose on Tuesday, holding near multi-year highs, amid optimism that demand will recover rapidly in the second half of this year.

Brent crude was up by 52 cents, or 0.7 percent, at $73.38 a barrel by 1028 GMT, close to a late April 2019 high. US oil gained 49 cents, or 0.7 percent, to $71.37 a barrel, near a 32-month high.

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“We regard the continuing good news on the demand front and upbeat sentiment on the financial markets as the key reasons for the latest upswing,” Commerzbank said.

The head of trading house Vitol sees oil prices moving between $70-$80 a barrel this year on the expectations that OPEC+ will keep its supply discipline.

“We have had those stock draws for a couple months, the market is heading in the right direction ... my impression it is not a super cycle,” Russell Hardy told the FT Commodities Global Summit.

Members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia -- a group known as OPEC+ -- have been gradually easing record output cuts in recent months.

“Continuous supply deficit is as good as guaranteed for the coming six months even if OPEC and its ten allies decide to further ease supply constraints after July to meet at least part of the rising demand,” brokerage PVM oil said.

Investors and traders are also watching the outcome of a two-day US Federal Reserve meeting that starts later on Tuesday for signals on when it will start to scale back monetary stimulus, he said.

The Fed is getting ready to starting debating how and when to start tapering a massive asset-purchase program that helped support the US economy during the pandemic.

In Britain, the end of COVID-19 restrictions were delayed from June 21 by a further four weeks.

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