Oil Makes Monthly, Quarterly Gains As Focus Narrows To Upcoming OPEC Summit

Meanwhile, demand recovery continues its upward trajectory: File Image/Pixabay

The Organization of the Petroleum Exporting Countries (OPEC) acknowledging market tightness combined with substantial stock draws in the U.S. caused oil prices on Wednesday to climb again, resulting in monthly and quarterly gains.

After the Energy Information Administration reported that inventories fell last week for the sixth straight week to their lowest since March 2020, Brent ended the session up 37 cents at $75.13 per barrel; West Texas Intermediate settled up 49 cents at $73.47 per barrel.

Both benchmarks are on track to record their seventh monthly gain in the past eight months; for June, WTI rose more than 10 percent while Brent rose over 8 percent.

Andrew Lipow, president of Lipow Oil Associates, said, "With continued decline of Cushing crude oil inventories and an upcoming OPEC+ meeting tomorrow, I expect crude oil prices will rise as the market has been crying out for more supplies."

Lipow was referring to a highly-anticipated meeting in which it is expected that the cartel will discuss whether to extend its deal on cutting oil supply beyond April 2022: the broad expectation is it will return 500,000 barrels of oil per day to the market in August, a possibility that caused some analysts to predict skyrocketing prices.

For his part, Julian Lee, oil strategist for Bloomberg, argued that OPEC should agree to a bigger-than-expected output increase in order to reduce the high prices currently hurting key customers such as India: "After all, it can always be reversed next month if things don't go as planned."

More signs of global recovery as the Covid pandemic slowly fizzles out were provided by Goldman Sachs, which on Wednesday estimated that demand will rise by a further 2.2 million barrels per day (bpd) by the end of 2021, leaving a 5 million bpd supply shortfall.

Jay Hatfield, portfolio manager for Infracap MLP ETF, remarked, "Our hypothesis is that we are going to have global travel-geddon to Europe, more demand for jet fuel that will drive us to $80 a barrel."

And despite media concern over isolated Covid breakouts and the Delta variant (both of which scientists say should not concern vaccinated populations), Mohammad Abdulatif al-Fares, oil minister for Kuwait, echoed the optimism of many officials on Wednesday by stating,"The expansion of coronavirus vaccine rollouts is contributing to strengthening expectations of economic growth in major and emerging economies, bolstering the global demand for crude."