Crude posted a fourth consecutive weekly gain, as signs of a recovery in global demand and supply discipline among producers encouraged investors.
Futures in New York were up 1% this week. Strong US demand growth is spreading to Europe and emerging markets, where India is also beginning to show improvement, according to Goldman Sachs Group Inc.
“We continue to expect a rebound in demand in the second half of the year,” said Bart Melek, head of commodity strategy at TD Securities. “We’re seeing vaccine programs advancing around the world, and much of the United States is already opening up as the busiest car season begins.”
Oil has recovered nearly 50% this year with widespread vaccination driving demand, while the Organization of Petroleum Exporting Countries and its allies, known as OPEC +, have been cautious about bringing supply back to the market. Shale producers in the oil-rich Permian basin have also largely slowed down. The United States is pumping about 1.9 million fewer barrels per day since Covid-19 caused prices to drop in 2020, a reduction larger than the production of Nigeria and Venezuela combined.
Global demand for crude is likely to have hit 97 million barrels a day recently, up from 95 million a few weeks ago, according to Goldman Sachs. Consumption before the pandemic was around 100 million barrels a day. The bank said oil is its most “conviction” bullish option among commodities.
The Federal Reserve’s announcement this week of two possible rate hikes for 2023 caused the dollar to strengthen, causing the prices of commodities traded in the currency to rise higher. That sparked a sell off of raw materials earlier in the week.