Oil prices climbed to their highest level since October 2018 on Friday, raising both benchmarks for the fifth week in a row on expectations that demand growth will outpace supply and OPEC+ will be cautious about bringing more crude to the market from August.
Brent futures rose 62 cents, or 0.8%, to settle at $76.18 a barrel, while West Texas Intermediate (WTI) crude rose 75 cents, or 1.0%, to $74.05.
These were the highest closes for both benchmarks since October 2018, pushing both contracts up over 3% over the week.
Crude oil prices are rising above expectations for the market to remain tight, amid rising demand outlook and forecasts that OPEC+ will provide only a small boost to production at its July 1 ministerial meeting.
All eyes are on the Organization of the Petroleum Exporting Countries, Russia and its allies, which will meet on 1 July to discuss further easing of production cuts from August.
The producer group intends to remain restrained in production, although the demand outlook is brighter and has ample room to increase supply in oil inventories.
On the demand side, key factors for OPEC+ to consider are strong growth supported by vaccine launches and reopening economies in the US, Europe and China. But these are offset by rising COVID-19 cases and outbreaks.
Serious differences remain on a number of issues regarding Tehran’s compliance with the 2015 nuclear deal. The prospects for the lifting of sanctions against Iran and more oil entering the market in the near future are not very strong.
US Secretary of State Antony Blinken said on Friday that the lack of an interim agreement between the UN observer and Iran on monitoring nuclear activities is a serious concern conveyed to Tehran.
If an Iran deal is not reached by July 1, OPEC+ is expected to revert to month-to-month quota setting and announce a modest production increase for August at their meeting next week.
Meanwhile, the number of U.S. oil rigs, an early indicator of future output, fell one to 372 this week, according to energy services firm Baker Hughes Co. Despite that small decline, the rig count gained 13 in June, its 10th monthly rise and increased 48 in the second quarter, its third consecutive quarterly rise.
