Oil prices rise as demand improves, supplies tighten
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[June 14, 2021] By
Bozorgmehr Sharafedin
LONDON (Reuters) - Oil prices rose on
Monday, hitting their highest levels in more than two years supported by
economic recovery and the prospect of fuel demand growth as vaccination
campaigns in developed countries accelerate.
Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its
highest since May 2019.
U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a
barrel, its highest since October 2018.
"The two leading crude markers are trading at (almost)
two-and-a-half-year highs amid a potent bullish cocktail of demand
optimism and OPEC+ supply cuts," said Stephen Brennock of oil broker PVM.
"This backdrop of strengthening oil fundamentals have helped underpin
heightened levels of trading activity."
Motor vehicle traffic is returning to pre-pandemic levels in North
America and much of Europe, and more planes are in the air as anti-coronavirus
lockdowns and other restrictions are being eased, driving three weeks of
increases for the oil benchmarks.
The mood was also buoyed by the G7 summit where the world's wealthiest
Western countries sought to project an image of cooperation on key
issues such as recovery from the COVID-19 pandemic and the donation of 1
billion vaccine doses to poor nations.
"If the inoculation of the global population accelerates further, that
could mean an even faster return of the demand that is still missing to
meet pre-Covid levels," said Rystad Energy analyst Louise Dickson.
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The moon rises behind the storage tanks of a local oil refinery in
Omsk, Russia June 5, 2020. REUTERS/Alexey Malgavko
The International Energy Agency (IEA) said on Friday that it expected global
demand to return to pre-pandemic levels at the end of 2022, more quickly than
previously anticipated.
IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and
allies, known as OPEC+, to increase output to meet the rising demand.
The OPEC+ group has been restraining production to support prices after the
pandemic wiped out demand in 2020, maintaining strong compliance with agreed
targets in May.
Graphic: Oil Demand/Supply balance
https://fingfx.thomsonreuters.com/
gfx/mkt/rlgpddqrgpo/
demandsupplyjune.PNG
On the supply side, heavy maintenance seasons in Canada and the North Sea also
helped prices stay high, Dickson said.
U.S. oil rigs in operation rose by six to 365, the highest since April 2020,
energy services company Baker Hughes Co said in its weekly report. [RIG/U]
It was the biggest weekly increase of oil rigs in a month, as drilling companies
sought to benefit from rising demand.
(Reporting by Bozorgmehr Sharafedin in London, additional eporting by Aaron
Sheldrick; editing by Ana Nicolaci da Costa, Jason Neely and Emelia
Sithole-Matarise)
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