U.S. West Texas Intermediate and international-benchmark Brent crude oil futures closed sharply higher last week on rising demand expectations as the global economy continues to reopen at a steady pace and the vaccination rate increases. Fear of Iranian oil hitting the global supply have eased as well as concerns over rising U.S. gasoline stocks.

Last week, September WTI crude oil futures settled at $69.92, up $1.03 or +1.50% and September Brent crude oil finished at $72.11, up $0.62 or +0.86%.

With the downside risks protected by bullish fundamentals and OPEC+’s production limits, traders are now looking for upside objectives. Last week, U.S. investment bank Goldman Sachs forecast Brent crude prices to reach $80 per barrel this summer.

OPEC+ Will Need to Boost Output to Meet 2022 Demand Recovery – IEA

OPEC+ oil producers will need to boost their output in order to meet demand set to recover to pre-pandemic levels by the end of 2022, the International Energy Agency said on Friday.

“OPEC+ needs to open the taps to keep the world oil markets adequately supplied,” the Paris-based energy watchdog said, adding that rising demand and countries’ short-term policies were at odds with the IEA’s call to end new oil, gas and coal funding in a stark report issued last month.

“In 2022 there is scope for the 24-member OPEC+ group, led by Saudi Arabia and Russia, to ramp up crude supply by 1.4 million barrels per day (bpd) above its July 2021-March 2022 target,” it said in its monthly oil report.

OPEC+ agreed in April to gradually ease oil output cuts from May to July and confirmed the decision at a meeting on June 1.

Meeting the restored demand is “unlikely to be a problem”, the IEA said, forecasting that OPEC+ will still have 6.9 million bpd of effective spare capacity after July and that Iran’s talks with world powers could free its oil supply from U.S. sanctions.

“If sanctions on Iran are lifted, an additional 1.4 million bpd could be brought to market in relatively short order.”

Story continuesWeekly Outlook

Conditions seem to be perfect for the rally to continue this week, but there are potential headwinds that could give bullish traders an excuse to lighten up on the long-side and book profits. These include rising gasoline stocks, the lifting of Iranian sanctions that includes the release of crude oil and worries that OPEC will consider raising production when it meets the first of July.

Last week, crude oil prices retreated when the EIA reported a larger than expected build in gasoline inventory. Prices were able to recover after traders pinned the rise in supply on the timing of transfers to retailers rather than evidence of weak consumption at the start of the driving season. Prices could fall this week if there is another build in gasoline stocks and it’s tied to lower driving demand.

Also last week, U.S. Secretary of State Antony Blinken said he anticipates that even if Iran and the United States return to compliance with the nuclear deal, hundreds of U.S. sanctions on Tehran would remain in place. But, what if he is wrong and the sanctions are lifted on Iranian crude oil exports?

Finally, OPEC+ could heed the comments from the IEA and open up production to meet rising demand sooner than expected.

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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