Oil futures rose Wednesday, with the U.S. benchmark crude extending a push above the $70-a-barrel threshold on expectations for strengthening demand and as data from an industry trade group showed a fall in American crude inventories.
West Texas Intermediate crude for July delivery CL00, +0.53% CLN21, +0.53% rose 39 cents, or 0.6%, to $70.44 a barrel on the New York Mercantile Exchange. August Brent crude BRN00, +0.65% BRNQ21, +0.65%, the global benchmark, was up 45 cents, or 0.6%, at $72.67 a barrel on ICE Futures Europe.
WTI closed Tuesday at its highest since October 2018, while Brent logged the highest settlement for a front-month contract since May 2019.
“Demand optimism continues to support the complex, with global COVID-19 cases continuing to trend lower after peaking in late April,” said Warren Patterson, head of commodities strategy at ING, in a note.
“In addition, the U.S. eased its COVID-19 travel warnings for a number of countries, and while this is unlikely to lead to an immediate rebound in international travel, it is clearly a step in the right direction,” he said. “We believe that the demand outlook will remain supportive for prices as we move through the year.”
Scope for further upside, however, is limited by the more-than-6-million barrels a day of spare capacity that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, is withholding from the market, Patterson said.
The American Petroleum Institute reported late Tuesday that U.S. crude supplies fell by 2.1 million barrels for the week ended June 4, according to sources. The API report reportedly also showed gasoline stockpiles up by 2.4 million barrels, while distillate inventories climbed by nearly 3.8 million barrels.
Crude stocks at Cushing, Okla., the Nymex delivery hub, meanwhile, edged down by 420,000 barrels for the week, sources said.
More closely followed inventory data from the Energy Information Administration will be released Wednesday. On average, the EIA is expected to show crude inventories down by 4.1 million barrels, according to a survey of analysts conducted by S&P Global Platts. It also forecast supply increases of 1 million barrels for gasoline and 400,000 barrels for distillates.
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