U.S. West Texas Intermediate and international-benchmark Brent crude oil finished higher last week, overcoming early week losses. The strength in the market was driven by an optimistic outlook for the global economy especially in the United States.

That assessment follows robust U.S. economic data tied to the highly successful rollout of vaccinations, and a notable drop in crude and fuel inventories associated with the reopening of the economy.

Meanwhile, investors shrugged off concerns over the spread of COVID-19 in India and predictions of increased supply from Iran once the rogue nation reaches a deal with the U.S. and other Western nations over nuclear issues.

Last week, July WTI crude oil futures settled at $66.32, up $2.74 or +4.31% and August Brent crude oil finished at $68.72, up $2.37 or +3.45%.

Improving Outlook for US, Global Economy Driving Demand Expectations

Strong U.S. economic data throughout the week and expectations of a rebound in global demand outweighed concerns about more supply from Iran once sanctions are lifted. That just about sums up the reasons for last week’s rally.

According to reports, global oil demand is expected to rebound closer to 100 million barrels per day in the third quarter on summer travel in Europe and the United States following widespread COVID-19 vaccination program rollouts.

“Gasoline demand has now exceeded 2019 levels in many areas,” ANZ analysts said in a note on Friday.

That assessment was likely supported by last week’s gasoline inventory numbers from the American Petroleum Institute (API) and the Energy Information Administration (EIA).

Last Tuesday, the API reported that gasoline inventories fell by 2 million barrels. On Wednesday, the EIA reported that U.S. gasoline stocks fell by 1.7 million barrels in the week to 232.5 million barrels, compared with expectations for a 614,000-barrel drop.

Additionally, gasoline product supplied rose to 9.5 million barrels per day, a proxy for demand, while distillate demand was also higher. Gasoline consumption generally rises beginning around U.S. Memorial Day – which fell on May 31 this year – when people take to the roads. People are also taking to the air, which is driving up jet fuel demand.

Story continuesWeekly Outlook

The focus for traders this week will continue to be on fuel demand and the OPEC+ production decision.

More than 34 million Americans are expected to take to the highways between May 27 and May 31, the holiday weekend which marks the start of the summer driving season. That being said, traders are likely to price in another drop in gasoline and crude oil inventories that should underpin the market.

Balancing expectations of a recovery in demand against a possible increase in Iranian supply, OPEC and its allies including Russia, is likely to stick to the existing pace of gradually easing oil supply curbs at a meeting on Tuesday, June 1, OPEC sources said.

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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