FX.co ★ Oil prices edge up on bullish demand outlook

Both benchmarks have shown positive dynamics for the third consecutive trading session. In the late previous trading session on the ICE exchange, Brent crude traded at $68.56. The difference from the previous closing price was 1.9%. West Texas Intermediate also gained 1.8% to settle at $65.01 per barrel, hitting the highest level in a month and a half.

On Friday morning, oil prices showed signs of waning upside momentum after a three-day rise, entering a downward correction. Thus, at the time of preparing this material, Brent crude oil futures for July delivery sank by 0.54% to $67.68. The June contract lost 0.51% of its value and approached the level of $68.21. WTI also fell by 0.68% to $64.57.

Despite today's downward correction, oil is still likely to close the trading week with gains. According to the latest data from Bloomberg, the price of Brent rose by 3.3% over the week and added 7.4% over the month. WTI added 4% over the past seven days, while its monthly gains amounted to more than 9%.

The main driver for oil prices is growing optimism about the post-pandemic economic recovery. This hope is backed up by fresh positive statistics from the United States. Thursday's report showed that US GDP jumped 6.4% in the first quarter. Besides, there is a positive trend in the labor market. Last week, unemployment claims decreased by 13,000 compared to the revised reading of the previous seven-day period.

Meanwhile, the US Energy Information Administration said on Wednesday that the level of crude oil inventories is equal to the five-year average for the season (for the first time in several months). In addition, middle distillate inventories fell by 3.3 million barrels in the week to April 23.

Middle distillates (mostly diesel) were a headache for refiners during the coronavirus pandemic. Inventories reached excessive levels due to the slowdown in various activities involving freight transport. Now, businesses are returning to normal operation and demand for diesel is picking up again.

However, commodity analysts point out that the latest rebalancing of US fuel stocks was enough to overshadow concerns about gasoline demand in the coronavirus hotspot, India.

"The performance of the past few days demonstrates the unbroken faith of the market in healthy economic and demand recovery," Tamas Varga, analyst at PVM Oil associates, said. "It also implies that the perilous and devastating COVID nightmare engulfing in India, Japan and Turkey, amongst others, is not expected to have a long-lasting impact on economic expansion," he added.

Bjornar Tonhaugen, head of oil markets at Rystad Energy, is also optimistic about a rapid recovery in demand for oil. He expects a rebound in global crude demand as early as this summer.

"As vaccination campaigns progress and as lockdowns are set to soon be lifted in Europe and other recovering economies, the need for road and jet fuels will increase and the result will be felt," the expert noted.

This week, OPEC+ has also raised its oil demand growth forecast from 5.9 million barrels per day to 6 million barrels per day. Thus, global oil demand is expected to grow to over 96 million barrels per day. At the same time, OPEC+ believes that the surplus oil reserves accumulated during the pandemic will be completely exhausted by the end of the second quarter.

US bank Goldman Sachs said it expected the biggest jump in oil demand in history at 5.2 million barrels per day over the next six months. Its analysts predict a jump in the demand for aviation fuel over the next six months (the segment most affected during the pandemic). Global jet demand is likely to recover by 1.5 million barrels per day, they said.

Experts believe that the oil market will be driven by accelerating vaccination campaigns in Europe and lifting restrictions. This will lead to increased activity and, in particular, travel activity. Against this background, oil prices may jump dramatically. According to Goldman Sachs, Brent crude will grow by 19% to $80 per barrel, and WTI - by 20% to $77 this summer.