Oil resumed its rally to top $70 a barrel in New York as investors grew more confident that accelerating vaccinations and easing travel restrictions will continue to boost demand. West Texas Intermediate futures surpassed the $70 mark to close at its highest since Oct. 2018 after briefly touching the key psychological level earlier this week. U.S. oil supplies fell 2.11 million barrels last week, the American Petroleum Institute was said to report. That would be the third straight weekly decline if confirmed by U.S. government data on Wednesday.

At the same time, confidence in the outlook for oil demand continues to grow as accelerating vaccinations allow people to travel more. The Middle Eastern Dubai benchmark is trading in its steepest backwardation — a market structure that indicates supply tightness — in almost a year after the region’s physical market had a strong start to the month. “There’s all sorts of technical models that work off closing prices,” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis. “Any time you have a close above a number divisible by 5, it tends to be pretty significant” in attracting flows such as those from commodity trading advisors.

Prices retreated from session highs after settlement, with the API report also showing sizable weekly increases in both gasoline and distillate inventories. Still, the path toward normal travel behaviors in the world’s largest oil-consuming country has provided support to the market as it takes on new multi-year highs. The U.S. State Department eased its travel warnings for nations around the world, including France, Canada and Germany, which could pave the way for loosening airline restrictions for trips overseas. “The fundamental outlook for crude is bullish right now,” said Edward Moya, senior market analyst at Oanda Corp. “The easing of travel restrictions will be a game-changer for the international air travel outlook, which is the last part of the equation for a robust demand recovery.”

WTI posted its narrowest discount against Brent since November following a similar run up last month. With the narrowness in the spread persisting, U.S. exports may see a dip as WTI loses competitiveness. Meanwhile, American shale oil production is poised to rise only moderately through 2022, even though gains in crude prices have triggered a pickup in drilling, according to BloombergNEF. That comes as the  Energy Information Administration trimmed its shale output forecasts for next year, according to a monthly report.

Oil declined alongside a broader market sell-off, with prices losing some momentum after hitting $70 a barrel in New York for the first time in over two years. U.S. benchmark crude futures were largely weaker on Monday after failing to sustain a move beyond the psychological $70-a-barrel level. Chinese oil imports, a major reason behind this year’s rally, fell to a five-month low in May as private refiners held back on purchases amid scrutiny of government-issued purchases quotas. Adding pressure on prices, U.S. equities declined with investors weighing inflation risks. “The market has found resistance,” said Gary Cunningham, director at Stamford, Connecticut-based Tradition Energy. “Prices ran up to $70 and just couldn’t keep the momentum going. We’re not seeing enough global demand” to justify a sustained move higher.

Still, prices have risen more than 40% this year with support from a robust economic rebound in the U.S., China and Europe. Europe’s  cities are as congested as they were in 2019, and the number of passengers passing through airport security checkpoints in the U.S. continues to climb. Those are the latest signs of an oil demand recovery in the Western world, and overall consumption should remain strong according to BP Plc. “There continues to be some concern regarding demand globally, but that’s likely temporary,” said Bart Melek, head of commodity strategy at TD Securities. “We’ll likely attempt to move toward the upper bound of the range if any good macro news emerges.”

OPEC+ appears in control of crude prices, with U.S. production still below pre-pandemic levels, said Mike Muller, Vitol Group’s head of Asia. The decline in U.S. drilling and output makes OPEC+’s job of managing markets easier, Vitol’s Muller said at a conference on Sunday. Still, even with prices near their highest levels in two-and-a-half years, North Sea oil traders continue to store oil on tankers at sea. About 6 million barrels of benchmark crude oil is now floating, according to ship tracking data compiled by Bloomberg, a potential sign of weak demand in Asia.

Oil and gasoline futures both posted their second weekly gain in a row as expectations for a demand pick-up from the northern hemisphere’s summer begin to come to fruition. Futures in New York rose nearly 5% this week, the largest such increase since mid-April. A string of data this week so far affirmed the market’s bet that higher vaccination rates and continuing reopening efforts are unleashing pent-up demand this summer.

On the supply side, oil is garnering support from deferred expectations on a renewed nuclear deal with Iran and OPEC+’s cautious approach to bringing back output. Meanwhile, global benchmark Brent ended the week above the psychological $70-a-barrel mark for the first time in over two years, nearing a technical level that may spur renewed flows into the market. “The domestic story remains good and OPEC+ seems to be not aggressively increasing supply,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. The market has been hoping for a return to “a more normal travel season, and that’s the data we’re seeing in the U.S. and Europe.” Without an immediate revival of the Iran nuclear accord looming over the market, traders see prices grinding higher as the summer demand story unfolds. U.S. government data this week served as confirmation that the world’s largest oil-consuming country is in the midst of a demand revival with the onset of the summer travel season, while other countries are also showing strength.

A gauge of gasoline consumption inched up for a third straight week at the highest since March 2020, according to the latest Energy Information Administration weekly storage report. In the U.K., government data showed road fuel sales jumped last week to near pre-pandemic levels. “It looks like the economy is back, certainly in the U.S., and vaccines are starting to spread, which is making people want to be long oil heading into the weekend,” said Michael Lynch, president of Strategic Energy & Economic Research. Once more countries start getting a hold on the Covid-19 spread, “economies are going to start booming with pent-up consumer demand.”

While the rebound remains patchy in parts of Asia, the sharp recovery taking shape in the west is spurring calls for OPEC+ to ensure the market doesn’t overheat. The OPEC+ alliance, which this week agreed to hike output in July, may need to keep adding barrels to the market in August or September to meet the recovery, according to Gazprom Neft PJSC Chief Executive Officer Alexander Dyukov.

Helping keep oil prices afloat this year has been renewed interest from commodity indec investors who are looking for ways to hedge inflation in their portfolios, wrote Ryan Fitzmaurice, commodities strategist. Investment dollars from this category of investors tends to be much “stickier” than other groups of traders. Even so, financial flows into the oil market are still somewhat muted. Trading volumes have remained light and speculative positioning in oil is relatively low, which could pave the way for higher prices in the coming months, Citigroup analysts including Francesco Martoccia wrote in a report.

Fueling Strategy: Please keep tanks topped tonight, Friday prices will jump UP another 3.5 cents then Saturday prices will drop 1/2 cent – Be Safe

Oil was virtually unchanged as a stronger dollar weighed broadly across commodities, while traders assessed rising fuel stockpiles in the U.S. Futures in New York lost two cents on Thursday, but still remain on track for a second straight weekly gain. U.S. government data showed domestic gasoline supplies rising by the most since early April, while distillate inventories climbed by nearly 4 million barrels. That’s offsetting back-to-back weekly declines in crude inventories.

The pause follows a fierce run-up at the start of the week, which has seen both crude benchmarks set fresh multi-year highs. The dollar surged by the most in three weeks on Thursday, making commodities priced in the currency less attractive. A spate of strong U.S. economic data has ratcheted up wagers the Federal Reserve may need to move faster on tapering its stimulus operations. “To have a draw that big on the crude oil side is really constructive for overall crude markets,” said Brian Kessens, a portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. However, the refined products build was disappointing and may be due to an increase in refinery utilization ahead of the summer driving season, he said.

Still, optimism is growing around the demand rebound from the U.S. to the U.K. and parts of Asia. As forecasts of a tighter market abound, Saudi Arabia hiked its official selling prices to Asia by more than expected. Even so, the nation’s energy minister reiterated that evidence of higher demand will have to come before supply increases. For demand, “there’s been a quick response to people getting vaccinated and lockdown restrictions coming off,” said Peter McNally, global head for industrials, materials and energy at Third Bridge. “There’s plenty of upside in gasoline consumption, and jet fuel demand is coming back. Even if international travel is slower to return, that’s not going to derail” the recovery.

Early signs that the U.S. is experiencing an uptick in demand heading into the summer are starting to be confirmed by U.S. government data. The four-week rolling average of gasoline supplied — which is used as a proxy of demand for the fuel — gained for a third week in a row at its highest since March 2020, Energy Information Administration data showed. The same gauge for jet fuel demand is also on its third consecutive week of gaining. “Even ahead of the Memorial Day holiday weekend, U.S. gasoline demand was posting strong numbers,” JPMorgan Chase & Co. analysts including Natasha Kaneva said in a report. Meanwhile, “global mobility continues to recover with Europe surging ahead and India finally turning a corner.”

Despite crude’s rally, holdings of ICE Brent futures contracts have fallen sharply in recent weeks. Total open interest on the global benchmark is near its lowest since December, and was overtaken by Nymex WTI for the first time since 2018 in recent days.  Meanwhile, even with signs a resolution to Iran nuclear talks may still be months away, the market continues to watch for developments that could lift sanctions on the Persian Gulf country’s crude exports. Returning Iranian output has “big” potential  to turn a supply deficit in the market into a surplus, Leonid Fedun, vice president for strategic development at Russia’s Lukoil PJSC, said at a forum.

Fueling Strategy: Please keep tanks topped today/tonight, Thursday prices will go UP 3.5 cents then Friday look for another bump UP of 3.5 cents- Be Safe

Oil futures extended their rise on Wednesday to their highest finish in over two years, buoyed by optimism over the outlook for global demand as events in Iran raised risks to supply stability in the region. Reports of a massive fire at a state-owned oil refinery new Tehan followed news that the largest warship in Iran’s nacy caught fire and sank on Wednesday. The events are “raising the overall risk premium in the Middle East,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch. “The shadow war in Iran is coming out of the shadows, and that is a concern for a market that is already worried about tightening supply,” he said. “It is hard to find any bearish fundamentals right now. The biggest downside risk is the return of Iranian supply” if a nuclear deal is reached, and “that looks more unlikely.”

U.S. oil futures settled with a loss on Friday, following five consecutive session gains, but prices settled higher for the week, as well as the month. “The U.S. economy is firing on all cylinders, with good news in every direction,” said Manish Raj, chief financial officer at Velandera Energy. “Improvements in the labor market, the housing market and consumer sentiments have solidified the demand recovery picture” for oil.

Traders also await the outcome of a meeting on Tuesday of the Organization of the Petroleum Exporting Countries and their allies, who will assess the latest oil-market conditions and decide on production levels. “We believe that OPEC+ will reaffirm its production hike next week, as demand fundamentals have only improved since the previous alliance meeting,” said Raj.

West Texas Intermediate oil for July delivery declined by 53 cents, or 0.8%, to settle at $66.32 a barrel on the New York Mercantile Exchange. Front-month contract prices gained more than 4% for the week, as well as the month, FactSet data show.

Oil futures finished higher on Thursday, with U.S. prices at their highest since 2018, as some upbeat U.S. economic data boosted prospects for energy demand, prompting prices to stretch their streak of gains into a fifth-straight session.

“The mood in oil got much better after strong GDP data, as well as a great jobs figure,” Phil Flynn, senior market analyst at The Price Futures Group, told Market Watch. The U.S economy expanded at an annualized 6.4% pace in the first quarter unrevised from the prior estimate released last month, while initial jobless claims sank 38,000 to 406,000 in the week ended May 22, down for a fourth week in a row. “Iran is still a wild card but as negotiations drag on the market is getting mixed messages,” said Flynn. At the same time, there is a growing assumption that some members of OPEC+ —the Organization of the Petroleum Exporting Countries and their allies — “may adjust plans based on the latest Iran news,” he said. OPEC+ will hold a meeting on Tuesday to discuss production levels.

NEWS

Oil futures finished higher on Wednesday, as price support from across-the-board declines in U.S. petroleum inventories outweighed concerns over the prospects for a return of Iranian crude supplies to the global market. A “full house of draws from this week’s inventory report” supported prices, said Matt Smith, director of commodity research, at ClipperData. “Crude inventories saw a modest draw, helped by ongoing strength in exports, a tick higher in refining activity, and a dip in imports,” he said in emailed commentary. “Higher implied demand for both gasoline and distillates encouraged a draw to both.”

When it comes to Iran, the key is the decision by the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, at their meeting on Tuesday, Flynn said. Russia is reportedly suggesting that the group should adjust their production to price in more Iranian barrels, he said. Tariq Zahir, managing member at Tyche Capital Advisors, expects crude prices to trade in a narrow range until the OPEC+ meeting, but the real market-moving influence could be “any news on lifting sanctions with Iran.” Iran has a large amount of oil that is in floating storage, and “any relaxing of sanctions could put additional oil into the markets,” Zahir told MarketWatch. “We also have to watch what Saudi Arabia does. If sanctions do get relaxed, we wouldn’t be surprised to see Saudi lower their prices, especially to Asia to retain and even gain market share.”

OPEC+ supply increases, along with the lifting of sanctions on Iran, could “soften energy prices, offsetting the demand increase we are seeing here in the U.S.,” said Zahir.