Inflation data and strong demand push oil prices to two-year highs

Through Andres Guerra Luz at 6/10/2021

(Bloomberg) –Oil hit its highest level in more than two years, supported by higher-than-expected U.S. inflation data and prospects of strong demand.

Futures in New York rebounded after falling 1.8% earlier Thursday, following news of the removal of US sanctions against a former Iranian oil official.

Crude found support with consumer prices in the United States in May, beating expectations, prolonging a build-up of inflation over several months, which should boost interest in alternative assets like commodities to find performance. At the same time, the structure of the oil market has strengthened amid a recovery in demand and signs of global supply may be below expectations.

“The outlook for oil demand remains strong and strengthening,” said John Kilduff, partner at Again Capital LLC. Meanwhile, “there is an inflation boost spreading in the commodities sector, and crude oil is an important participant as a basic inflation hedge.”

Prices remain over 40% higher this year. Even as the Organization of the Petroleum Exporting Countries expects the recovery in global demand to accelerate in the second half of the year, the available capacity buffer for the group and its allies is less than 80% of what it’s on paper. OilX analysts also pointed out “several signs” in their data that world oil supplies are surprisingly lower, reflecting a combination of mature field and maintenance declines that have been delayed this year.

The United States has announced that it is removing sanctions against a number of people, including the former chief executive of the National Iranian Oil Company.

“I wouldn’t read too much about the Treasury’s move today to lift sanctions against an Iranian oil official,” said Hagar Chemali, a non-resident senior researcher at the Atlantic Council’s Geoeconomic Center. “The fact that no statement has been made about this delisting is the Treasury’s way of saying that there is not much there.”


  • West Texas Intermediate for July delivery rose 33 cents to $ 70.29 a barrel, the highest since October 2018
  • Brent for August settlement rose 30 cents to $ 72.52 per barrel, highest since May 2019

As a sign of greater market strength, nearby futures outperformed gains in the following months. The rapid timespread for Brent closed at its highest level since April Thursday, topping 50 cents a barrel. This structure indicates a limited supply in the Atlantic Basin region.

Meanwhile, a longer-term debate continues to rage over the sustainability of oil investments. Group of Seven leaders are discussing plans to shift the balance of buying cars from gasoline to greener vehicles by the end of the decade. It comes just a day after Shell announced it would step up its carbon emissions reduction.

Other market news:

  • Saudi Arabia has given full contractual volumes of oil for July loading to at least four customers in Asia, people familiar with the matter say.
  • Trafigura Group posted its highest half-year profit on record as the commodities trading giant profited from wild moves in oil and metals prices caused by the pandemic.
  • Traffic is roughly back to pre-pandemic levels on roads through the Americas and most of Europe, as the decline in coronavirus cases prompts commuters to return to their cars.
  • A pair of shale contractors have agreed to buy a strip of Permian Basin oil wells and drilling rights from Occidental Petroleum Corp. for $ 508 million, the duo’s second such deal in less than two weeks.

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