Oil dips but hovers near three-year highs on recovery signs

Drawdown in US inventories, accelerating German economic activity support crude prices

LONDON:

Oil prices dipped modestly on Thursday, but still held close to their highest in almost three years, supported by drawdowns in US inventories and accelerating German economic activity.

Doubts about the future of 2015 Iran nuclear deal that could end US sanctions on Iranian crude exports also helped prices.

Brent crude dipped $0.18, or 0.24%, to $75.01 a barrel by 1055 GMT, after earlier rising to $75.78. US crude slipped $0.17, or 0.23%, to $72.91 a barrel, after hitting a session high of $73.61 earlier.

Both benchmarks had hit their highest since October 2018 on Wednesday before slightly paring back gains.

 “The narrative is unchanged. The bounce in Western-world commuting and leisure activity fuels oil demand and drains oil supplies,” Norbert Rücker, head of economics at Julius Baer, wrote in a note.

Further stoking expectations of a European fuel demand recovery, data from Germany showed the largest upward leap in retail conditions since German reunification more than three decades ago.

Across the Atlantic, US crude inventories dropped to their lowest since March 2020, official data showed. US gasoline stocks also posted a surprise draw.

The Organisation of the Petroleum Exporting Countries and its allies, a group known as OPEC+ that meets on July 1, have been discussing a further unwinding of last year’s record output cuts from August, but no decision has been made, two OPEC+ sources said on Tuesday.

 “Given the good sentiment and robust demand, OPEC+ is likely to find it easy next week to announce a further increase in production, at least for August, without jeopardising the upswing enjoyed by the oil price,” Commerzbank analysts wrote.

They said “the currently positive general tenor on the oil market” was driving prices up.

Brent has gained more than 45% this year on the OPEC+ supply cuts and recovering demand. Some industry executives have talked of crude returning to $100 for the first time since 2014.

Iran said on Wednesday the United States had agreed to remove all sanctions on Iran’s oil and shipping, but Washington said “nothing is agreed until everything is agreed” in talks to revive the 2015 Iran nuclear deal.