Oil prices edged up to fresh four-week highs on Thursday as positive U.S. economic data boosted stock markets and on higher demand forecasts from the International Energy Agency (IEA) and OPEC as countries start to recover from the COVID-19 pandemic.
After rising almost 5% on Wednesday, Brent futures rose 42 cents, or 0.6%, on Thursday to $67.00 a barrel by 2:00 p.m. EDT (1800 GMT), while U.S. West Texas Intermediate (WTI) crude rose 38 cents, or 0.6%, to $63.53.
That put both contracts on track to increase for a fourth straight day for the first time since February and also put both on track to settle at their highest since March 17 for a second day in a row.
“Oil is beginning to reconnect with strong equities with further assistance from a weakening dollar,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
U.S. 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 (.SPX) and the Dow Jones (.DJI) indexes to record highs, bolstering hopes of a broader economic rebound.
The U.S. dollar was on track to fall to a four-week low against a basket of currencies. A weaker dollar makes oil cheaper for holders of other currencies, which traders said helps support crude prices.
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.
U.S. crude inventories, meanwhile, fell 5.9 million barrels last week, government data showed on Wednesday, with East Coast crude stocks falling to a record low.
Supply discipline and rebounding economies are set to give oil a chance to break out of the recent range, analysts at Goldman Sachs 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 will 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 U.S. 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. (Reuters)