Oil extended gains above $70 a barrel after an industry report pointed to another draw in U.S. crude stockpiles, reinforcing optimism around the demand recovery.
Futures in New York rose 0.6% after settling above the threshold on Tuesday for the first time since October 2018. The American Petroleum Institute reported crude inventories fell by 2.11 million barrels last week, according to people familiar with the data. Oil is also being aided by a weaker dollar, while the market for Middle Eastern crude is showing signs of strength.
The robust rebound has been underpinned by a demand recovery in the U.S., China and Europe, and there are signs the Covid-19 resurgence in Asia may be easing. The U.S. State Department loosened its travel warnings for nations around the world, which could pave the way for more airline travel.
Progress is being made on reviving a nuclear deal with Iran, according to the U.S., which asked Tehran to restore full International Atomic Energy Agency inspections. A renewed deal may lead to an easing of American sanctions and an increase in Iranian crude flows to global markets.
“The demand story remains constructive for the market, with global Covid-19 cases declining for several weeks now,” said Warren Patterson, the head of commodities strategy at ING Group in Singapore. “I find it difficult to see significant further upside, particularly when you consider that OPEC+ are sitting on more than 6 million barrels a day of spare capacity.”