NEW YORK: Oil prices held near a one-month high on Thursday following positive US economic data and higher demand forecasts from the International Energy Agency (IEA) and OPEC as countries start to recover from the COVID-19 pandemic.
The IEA and the Organization of the Petroleum Exporting Countries this week made upward revisions to their global oil demand growth forecasts for 2021 to 5.7 million barrels per day (bpd) and 5.95 million bpd respectively.
US retail sales rebounded more than expected in March as Americans received additional pandemic relief checks and as COVID-19 vaccinations allowed broader economic re-engagement.
That data and upbeat earnings from several companies helped push the S&P 500 and the Dow Jones indexes to record highs, bolstering hopes of a broader economic rebound.
Brent futures rose 4 cents, or 0.1%, to $66.62 a barrel by 11:47 a.m. EDT (1547 GMT), while US West Texas Intermediate (WTI) crude fell 7 cents, or 0.1%, to $63.08.
On Wednesday, both contracts jumped almost 5% to settle at their highest levels since March 17.
“Following such (an) upbeat performance, some consolidation around these levels is not so surprising,” said Sophie Griffiths, market analyst UK & EMEA at OANDA.
“Better-than-expected stockpile data – both EIA and API – a weaker US dollar and optimism surrounding more energy demand helped oil book its strongest daily gains since late March on Wednesday,” Griffiths said, referring to weekly data from the US Energy Information Administration and industry group the American Petroleum Institute.
US crude inventories fell 5.9 million barrels last week, EIA data showed on Wednesday, with East Coast crude stocks falling to a record low.
The US dollar fell to a four-week low against a basket of currencies earlier on Thursday. A weaker dollar makes oil cheaper for holders of other currencies, which traders said also helped support crude prices. Supply discipline and rebounding economies are set to give oil a chance to break out of the recent range, Goldman Sachs analysts said in a report.
“We remain positive on Brent oil forecasting $80 (per barrel in the third quarter) on a near-term demand recovery and supply discipline,” the bank said.
Despite all the bullish economic news, some energy traders noted oil price gains would likely be capped by OPEC’s plans to ease production cuts starting next month.
OPEC and its allies, including Russia, a group known as OPEC+, agreed to bring back about 2 million barrels per day (bpd) of production over the next three months.
The United States, meanwhile, imposed a broad array of sanctions on Russia to punish it for alleged interference in the 2020 US election, cyber-hacking, bullying Ukraine and other “malign” acts.
And Royal Dutch Shell played down the risk that its oil and gas assets would become stranded as it prepares to reduce greenhouse gas emissions in the coming decades, noting that the majority of its reserves will be produced by 2050.