Oil crosses $75 for the first time in two years

Crude oil prices rose on Tuesday, with Brent hitting $75 a barrel for the first time since April 2019, as investors remained bullish about a quick recovery in global oil demand and as concerns eased over an early return of Iranian crude.

Brent crude futures for August climbed 29 cents, or 0.4 percent, to $75.19 a barrel by 06:58 GMT, paring earlier losses. It rose as high as $75.27 a barrel, the strongest since April 25, 2019, earlier in the session.

US West Texas Intermediate (WTI) crude for July was at $73.66 a barrel, unchanged from the previous session. WTI for August climbed 13 cents, or 0.2 percent, to $73.25 a barrel.

Brent gained 1.9 percent and WTI jumped 2.8 percent on Monday.

Both benchmarks have risen for the past four weeks on optimism over the pace of global COVID-19 vaccinations and expected pick-up in summer travel.

“The market sentiment stays strong with improved outlook for global demand,” said Satoru Yoshida, a commodity analyst with Rakuten Securities, adding that a rally in Asian stock markets is also helping boost risk appetite among investors.

Global shares on Tuesday extended their recovery from four-week lows as investors focused on prospects for post-pandemic economic growth, rather than fret more over the hawkish stance taken by the US Federal Reserve at a policy meeting last week.

The global crude benchmark has rallied more than 40 percent this year as a strong rebound from the pandemic in the US, China and Europe underpins increasing fuel consumption, although a virus comeback in parts of Asia is a reminder that the recovery will be uneven. Brent may even advance to $100 a barrel next year as travel demand rebounds, according to Bank of America Corp.

“Demand optimism is now well established and a tightening of the market is very much in the spotlight,” said Vandana Hari, the founder of Vanda Insights. “If there is a pause in this rally, it will likely come from the supply side.”

Investors are looking to weekly US inventory data as crude oil stockpiles have fallen for four weeks, said Toshitaka Tazawa, analyst at commodities broker Fujitomi Co.

US crude stocks were expected to drop for the fifth consecutive week, while distillate and gasoline were seen rising last week, a preliminary Reuters poll showed on Monday.

“The oil prices are expected to hold a firm tone amid expectations that fuel demand will pick up quickly along with economic recovery in Europe and the United States,” Tazawa said.

The price gap between the world’s two most actively traded oil contracts narrowed to its lowest in more than seven months, demonstrating that US oil output is still in the COVID-19 doldrums with the market likely to remain under-supplied.

Iran negotiations

Negotiations to revive the Iran nuclear deal took a pause on Sunday after hardline judge Ebrahim Raisi won the country’s presidential election.

Raisi on Monday backed talks between Iran and six world powers to revive a 2015 nuclear deal but flatly rejected meeting US President Joe Biden, even if Washington removed all sanctions.

“The lower probability of Iranian crude oil returning to the market due to the new hardline president is also supporting the market,” Fujitomi’s Tazawa said.

Meanwhile, China has issued 35.24 million tonnes of crude oil import quotas to non-state refiners in a second batch of allowances for 2021, a 35-percent drop from the same slot last year, according to a document seen by Reuters and two sources with knowledge of the matter.