U.S. West Texas Intermediate and international benchmark Brent crude oil futures are inching lower on Friday, but remain in a position to post a fifth consecutive weekly gain on expectations demand growth will outstrip supply and OPEC and its allies will be cautious in returning more supply to the market from August.

At 11:06 GMT, September WTI crude oil futures are trading $72.44, down $0.19 or -0.26% and September Brent crude oil is at $74.65, down $0.16 or -0.21%. Both benchmarks are hovering near their highest levels since October 2018.

Oil prices also found support as the approval of a U.S. infrastructure bill boosted optimism over the energy demand outlook.

The focus now shifts to the OPEC+ meeting which is scheduled to be held on July 1. OPEC and its allies, including Russia are expected to discuss further easing of their output cuts from August.

On the Supply Side …

Wednesday’s price action suggested investors were impressed by the weekly inventories report from the EIA. The draw in crude oil was expected, but the drop in gasoline inventories sent out a signal that demand was healthy. Both drops in inventories confirmed the tight supply.

U.S. crude inventories fell by 7.6 million barrels in the week to June 18 to 459.1 million barrels, their lowest since March 2020, the EIA said. The drawdown was nearly double analysts’ expectations in a Reuters poll for a 3.9 million-barrel drop.

U.S. gasoline stocks fell by 2.9 million barrels in the week, compared with analysts’ expectations for an 833,000-barrel rise. Distillate stockpiles, which include diesel and heating oil, rose by 1.8 million barrels versus expectations for a 1.1 million-barrel rise.

Refinery crude runs fell by 225,000 barrels per day in the last week, however, with utilization rates dropping by 0.4 percentage points to a still-strong 92.2%.

On the Demand Side …

The key factors OPEC+ will have to consider are strong growth in the United States, Europe and China, bolstered by vaccine rollouts and economies reopening, according to analysts who said this was countered by rising COVID-19 cases and outbreaks in other places.

Story continuesOPEC+ Meeting Moves to Forefront

Earlier in the week, Reuters reported that OPEC+ was discussing a further easing of oil output cuts from August as oil prices rise on demand recovery, but no decision had been taken yet on the exact volume to bring back to the market, two OPEC+ sources said on Tuesday.

OPEC+ is returning 2.1 million barrels per day (bpd) to the market from May through July as part of a plan to gradually unwind last year’s record oil output curbs.

“It is highly possible to increase gradually from August,” said one of the sources, adding that no final decision had been made and the exact volumes are yet to be agreed on.

Reuters said the talks mean OPEC and Russia are likely to find common ground again on oil production policy. Moscow has been insisting on raising output further to avoid prices spiking, while key OPEC producers, such as Saudi Arabia, have given no signals on the next step until now.

Russian producers see August as a good time to further ease oil output cuts despite the expected return of Iranian barrels as the market is in deficit, an industry source told Reuters on Tuesday.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire


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