Oil Prices Steady at 2-Year High amidst Demand Optimism

Oil Prices Steady at 2-Year High amidst Demand Optimism

Crude oil prices were steady on Tuesday, maintaining their two-year-high levels helped by investor confidence over an oil demand recovery throughout the summer driving season, particularly in the United States and Europe. This comes just as India, the second-largest oil consumer, is making a gradual but stable recovery from the pandemic.

International benchmark Brent crude was trading at $73.21 per barrel after a 0.48% increase from $72.86 a barrel on Monday. Market data shows that Brent had earlier hit $73.64, the highest since April 2019 when it traded at $74.42.

American benchmark West Texas Intermediate (WTI) traded at $71.19 a barrel at the same time for a 0.43% rise after ending the previous session at $70.88 per barrel. Before it retraced, WTI reached $71.78 during the previous session, overtaking the highest level since October 2018 when it hit $71.24.

Oil Prices Steady at 2-Year High amidst Demand Optimism

Meanwhile, the oil market became tighter with a narrowing supply-demand gap from the uptake in vaccine campaigns worldwide.

This has led to a decline in daily virus cases and the lifting of restrictions in the world’s big economies, including Europe and the US.

Road and air traffic in the US and Europe is back to pre-pandemic levels as countries ease mobility restrictions. However, supply concerns remain due to the slow pace of vaccination in some regions.

According to Nasdaq, as of June 1, 38% of the UK’s population is fully vaccinated, while this rate is 19% in the EU and 41% in the US.

The ongoing nuclear talks between the US and Iran in Austria’s capital Vienna have reached a stalemate. Although a slew of sanctions aimed at Iran’s energy industry were lifted last week, sanctions on the country’s oil exports are still in place.

Iran on Monday warned that there was “very little time left” for world powers to revive a 2015 nuclear deal. When sanctions are lifted, experts say Iran can easily produce 3.8 million barrels per day, which was its official OPEC quota.

Iranians have been advised to diversify their economies in long term instead of just relying on oil revenues, a former US Secretary of Energy said on Tuesday amid ongoing US-Iran talks in Austria aimed at lifting the sanctions on Iran’s oil exports.

Speaking at virtual Citizens Energy Congress, Ernest Moniz who served as Secretary of Energy during the term of the 44th US President Barack Obama, said Iran could easily reach to its pre-sanctions oil production level.

Predicting that the sanctions on Iranian oil sector would be eventually lifted, Moniz said if two countries reach an agreement, “while many sanctions will remain in place, as they did in 2015, clearly, the sanctions on oil sales will be removed.”

“We saw it when the agreement was signed in 2015 that Iran was able to lift its oil exports back into the 2.5-3 million barrels a day range that was there before the sanctions, and I see no reason not to expect a similar issue here,” he said.

Moniz also warned that other oil rich countries in the region such as Saudi Arabia and the United Arab Emirates really work hard to diversify their economy economies, and “that’s a message to the Iranians.”

He said relying on oil revenues in the long term is probably not the best business model for Iranians.

Over the past several weeks, Iran and other signatories to the deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), have been engaged in marathon negotiations in the Austrian capital Vienna to revive the accord.

Oil Prices Steady at 2-Year High amidst Demand Optimism

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