Demand Optimism Keeps Oil Prices Near Multi-Year High
Abhishek Bansal | Jul 02, 2021 04:09AM ET
WTI crude oil price is holding near the highest level since Oct. 18 on the backdrop of increasing demand optimism and unstable supply situation due to Iran nuclear talks and OPEC delays.
OPEC+ ministers delayed a meeting on output policy as the United Arab Emirates hesitated at a plan to add back 2 million barrels per day (BPD) in the second half of the year.
UAE and OPEC+ postponed the ministerial meeting to Friday. OPEC+ reached a preliminary agreement to raise production by 400,000 BPD each month from August through December; however, the UAE reportedly wanted a higher production quota and blocked an agreement, forcing the meeting to be adjourned until Friday.
Crude prices also found support from delays in Iran's nuclear talks. The seventh round of talks with world diplomats over Iran's nuclear program has been delayed with no resumption date fixed. Easy oil supply from Iran is delayed as talks are not progressing.
Increasing economic activity and travel in the US is likely to keep oil prices firm. As per a report from US TSA on Monday 2.17 million travelers passed through US airport checkpoints on Sunday, up +13% from Saturday and up +247% y/y, and the most since the pandemic began. Additionally, US gasoline demand in the week ended June 25 rose +0.4% w/w to 9.6317 million BPD, the highest this year
On the Inventory front, a weekly report from EIA suggests that crude inventories fell -6.72 million bbl to a 1-1/4 year low, against expectations of -4.0 million bbl. EIA distillate supplies unexpectedly fell -869,000 bbl against expectations of a +1.0 million bbl increase. However, EIA gasoline stockpiles unexpectedly rose +1.52 million bbl against expectations of a -1.0 million bbl decline.
US crude oil inventories as of June 25 were -6.5% below the seasonal 5-year average, gasoline inventories were +0.4% above the 5-year average, and distillate inventories were -4.7% below the 5-year average. Meanwhile, US crude oil production in the week ended June 25 was unchanged at 11.1 million BPD.
WTI Crude oil prices are likely to trade firm while above the key support level of 20 days EMA of $72.14 and 50 days EMA of $69.08, while it may face resistance around $76.5 and $77.8
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