Oil Gains as OPEC+ Forecasts Crude Stockpiles Will Drop Sharply

Oil pumping jacks in an oil field in Russia. (Photographer: Andrey Rudakov/Bloomberg)

Oil Gains as OPEC+ Forecasts Crude Stockpiles Will Drop Sharply

Oil climbed for a second month as OPEC and its allies forecast that inventories will fall sharply this year if the group sticks to its plan.

Futures rose 0.9% on Monday in New York, bringing their monthly gain to more than 5%, as the cartel said that a supply surplus will mostly be gone by the end of next month. Stockpiles are forecast to decline by at least 2 million barrels a day from September through December, the group said.

“Demand is strong, it’s going to grow, and inventories aren’t going to go up,” Bart Melek, head of commodity strategy at TD Securities, said by phone.

Oil Gains as OPEC+ Forecasts Crude Stockpiles Will Drop Sharply

Oil has climbed more than 35% this year as the OPEC+ alliance, led by Saudi Arabia and Russia, cautiously restores supplies cut when the pandemic slashed demand for fuel. In a meeting of its ministers on Tuesday, the 23-nation group is expected to approve a production increase scheduled for July, completing the return of just over 2 million barrels a day of halted supply since April of last year.

The U.S., China and parts of Europe are driving robust demand recovery from the Covid-19 pandemic, despite a virus comeback across Asia. American gasoline stockpiles have declined and consumption gained in the lead up to the Memorial Day weekend, which heralds the start of the summer driving season and peak fuel demand.

Average retail prices for regular gasoline in the U.S. rose to $3.046 per gallon on Sunday, the highest since October 2014, according to auto club AAA.

Prices
  • West Texas Intermediate for July delivery gained 59 cents to $66.91 a barrel on the New York Mercantile Exchange, with no settlement because of the Memorial Day holiday in the U.S.
  • Brent for August fell 31 cents to $69.32 on the ICE Futures Europe exchange in London. It was also a holiday in the U.K.

While rebounding demand is driving prices higher, the possibility of more barrels from Iran, should a nuclear deal be revived, is clouding the outlook.

Iran and world powers have resumed discussions that Russia’s envoy to the United Nations in Vienna said “should be final” in determining a path for the U.S. easing sanctions on the country’s oil exports in return for limits on the Middle Eastern country’s nuclear program. Iran will act swiftly to increase oil production and has no concern about finding buyers for its crude, Oil Minister Bijan Namdar Zanganeh told reporters in Tehran Monday.

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