U.S. crude futures climbed to the highest in more than two-and-a-half years after the OPEC+ alliance forecast a tightening global market, while international efforts to revive a nuclear deal with Iran were yet to reach a breakthrough.
West Texas Intermediate rose as much as 3.8 percent from Friday’s close to $68.87 a barrel, while global benchmark Brent topped $70, a level it has failed to hold for a sustained period since 2019.
The oil glut built up during the coronavirus pandemic has almost gone and stockpiles will slide rapidly in the second half of the year, according to an assessment of the market from an OPEC+ committee.
Traders also continue to follow the progress of negotiations between Tehran and world powers to revive the 2015 nuclear agreement, paving the way for increased oil supplies from Iran.
The country said it hopes to fully reactivate the deal before the end of the government’s term in August, raising the prospect that a solution may not be found in the current round of talks in Vienna.
“OPEC is seeing tightness” while the “Iran situation is very much a jump ball at this point,” said John Kilduff, a partner at Again Capital LLC. “It is all very bullish against the backdrop of demand that keeps surging, with the exception of India.”
OPEC+ stuck to its plan to hike oil output in July, as Saudi Arabia’s energy minister struck a bullish tone about the global recovery. The group will press ahead with an increase of 841,000 barrels a day in July, following hikes in May and June, according to delegates.
A robust economic recovery in the U.S. and Europe has given the Organization of Petroleum Exporting Countries and its allies the confidence that markets can absorb additional barrels.
Although Covid-19’s renewed surge in parts of Asia is threatening demand there, OPEC+’s Joint Technical Committee sees crude stockpiles falling by at least 2 million barrels a day from September through December.
The later a deal with Iran is signed, the greater the chances of oil-market tightness over the Northern Hemisphere summer.