Brent rallies close to $76 as markets remain tight

Opec secretary general Mohammad Barkindo said efforts by Opec+ to raise supply incrementally was instrumental in helping stabilise global oil markets. Victor Besa / The National

Brent, the international benchmark, inched closer to $76 per barrel on Wednesday, rallying to its highest level since October 2018.

The benchmark, under which two-thirds of global oil is traded, rose 1.06 per cent to $75.60 per barrel at 7.06pm UAE time. West Texas Intermediate, which tracks US crude grades, was up 1 per cent at $73.58 per barrel.

Prices rose amid reports that Opec+ is considering bringing an additional 500,000 barrels per day back to the markets next month following a ministerial meeting on July 1.

The group had earlier planned to add a total of 2 million bpd back to the markets by July, but the demand outlook had become uncertain as many countries were hit with fresh waves of Covid-19 infections.

Opec secretary general Mohammad Barkindo said efforts by the broader Opec+ group to raise supply incrementally have been instrumental in helping stabilise global oil markets.

“These efforts are bringing us step-by-step closer to bringing this pandemic under control, thereby helping accelerate the global economic recovery," he said.

"Indeed, the latest market developments point to much better conditions and improved outlooks,” he added.

Mr Barkindo was speaking at a meeting of the Economic Commission Board of Opec on Wednesday.

Earlier this month, the group left its outlook for global demand growth unchanged for the second consecutive month amid easing mobility restrictions.

Oil demand is expected to grow at 6 million bpd this year, with total consumption expected to hit 96.6 million bpd, according to Opec.

Oil also gained from a projected drawdown of US crude inventories.

The industry-funded American Petroleum Institute forecast a surprise 7.2 million barrel reduction in supply, causing both Brent and WTI to gain by more than $1 in a single day.

"Whether or not the actual EIA [Energy Information Administration] data today lives up to the bullish API forecast, the US is on track to recover to pre-pandemic refinery utilisation, as downstream players generally ramp up runs ahead of the busy driving season that peaks in August," said Louise Dickson, oil markets analyst at Rystad Energy.

"The inventory relief could provide another reason for the Opec+ alliance to boost production further from August and the coming meeting next week is expected to be material for policy and prices going forward," she added.