Oil prices retreat but outlook remains positive

Oil prices extended losses on Tuesday on profit taking and a stronger US dollar, but overall optimism about recovering demand kept a floor under prices.

Brent crude was down $0.58, or 0.8%, at $70.91 a barrel by 1218 GMT, after declining 0.6% on Monday. US West Texas Intermediate oil was off by $0.55, or 0.8%, at $68.68 a barrel, having dropped by 0.6% in the previous session.

"A previous price surge that was probably premature, coupled with a stronger US dollar and a correction on the stock markets, are weighing on oil prices," Commerzbank said.

As oil is priced in dollars, a stronger greenback makes crude more expensive for buyers with other currencies.

Data showing China's crude imports were down 14.6% in May on a yearly basis also weighed on prices.

"China was taking advantage of low oil prices a year ago, so the base is uncharacteristically high," oil brokerage PVM noted.

Heavy Chinese refinery maintenance in May also contributed to the decline.

Crude prices have risen in recent weeks, with Brent up by nearly 40% this year and WTI gaining even more, amid expectations of demand returning as some countries succeed in vaccinating populations against Covid-19.

Restraint on supply by the Organisation of the Petroleum Exporting Countries and allies has also helped buttress prices.

"The fundamental environment on the oil market remains favourable: fuel demand is recovering strongly not only in the United States, but also in Europe following the (partial) lifting of restrictions," Commerzbank said.

In Britain, one of the most vaccinated countries in the world, there are now doubts that the country will lift all coronavirus-related restrictions as previously planned on June 21.