Oil prices rise to $69.70 on demand optimism

Brent crude futures rose by 0.35% on Friday afternoon to close at $69.70 a barrel, while Western Texas Intermediate futures rose by 0.36% to close at $67.21, after having settled at the strongest since October 2018 on Thursday. Also, the Bonny light crude rose by 0.50% to close at $68.01, with the OPEC basket going up by 0.09% to close at $67.47. As a result crude oil prices on Friday traded close to its highest in over 2 years, rising amid hopes that an ongoing economic recovery in the United States will have a positive impact on oil demand despite concern that Iranian supplies will increase if sanctions on its crude export is lifted.

With prices stuck within a $10 range since March, market volatility has taken a hit, falling to its lowest level since August on the global Brent benchmark. The U.S. jobless claims fell to a new pandemic low in the week which ended May 22, and gross domestic product (GDP) growth in the first quarter came in unrevised at 6.4% in the second estimate, helping to reinforce the economic recovery narrative. Investors are getting ready for the vaccine-aided demand recovery as the summer driving season gets underway from the upcoming Memorial Day weekend.

Meanwhile, OPEC and its allies led by Saudi Arabia and Russia, are set to meet on June 1 to assess the global market and their production policy. The OPEC+ group is expected to confirm next week its May-July plan to ease the oil production cuts by the planned 840,000 barrels per day (BPD) in July. Economic data from the US and China the two world’s largest economies, shows that energy demand is expected to gain strong momentum relatively, particularly this summer with the easing of restrictions in many key economic hubs and social mobility gathering pace.