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(adds settlement prices)
By Peter Nurse
Investing.com -- Crude oil prices settled little changed Monday after hitting their highest levels in more than two years, boosted by renewed confidence in the economic revival and an associated jump in oil demand.
West Texas Intermediate, the benchmark for U.S. crude, settled down 3 cents at $70.88, after soaring to $71.78 earlier, its highest since October 2018. Brent, the gauge for global crude, settled up 17 cents at $72.86, after surging to $73.63, its highest since May 2019.
Oil prices have gained over 40% this year to date, supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.
“The June preliminary reading for the University of Michigan consumer sentiment index shows confidence moved higher” on Friday, said analysts at ING, in a research note. “This is encouraging for the growth outlook given the historically strong correlation between the overall expectations indicator and consumer spending.”
Additionally, U.S. daily air travelers have topped 2 million for the first time since the pandemic began with traffic returning to pre-pandemic levels in North America and much of Europe as lockdowns and other restrictions are being eased, even if England does decide to delay its full reopening later Monday.
The International Energy Agency predicted last week that global oil demand will recover to pre-pandemic levels late next year, tying in with a bullish forecast from the Organization of the Petroleum Exporting Countries that demand in 2021 would rise by 5.95 million barrels per day, up 6.6% from a year earlier.
Also helping the tone was the tone of cooperation at the weekend’s G7 summit, where the world's wealthiest democracies announced plans to donate 1 billion vaccine doses to poor nations.
As far as additional supply from Iran is concerned, the Persian Gulf country said earlier Monday that it has reached a broad agreement with the U.S. over the lifting of sanctions on its industrial sectors, including energy, but warned there was “very little time left” for world powers to revive a 2015 nuclear deal.
Even with the market trading at these elevated levels, traders seem optimistic about the scope for further gains. Friday’s weekly data from the Commodity Futures Trading Commission showed that WTI positioning was at the most bullish in about three years.
One potential note of caution, U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes said in its weekly report on Friday.
It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.