Oil on track for 9-week high on rising demand outlooks

Brent crude climbed 18 cents, or 0.3% to $68.73 a barrel at 0846 GMT

Parkland Fuel's refinery in Burnaby, British Columbia, Canada February 17, 2021. Image used for illustrative purpose.

Parkland Fuel's refinery in Burnaby, British Columbia, Canada February 17, 2021. Image used for illustrative purpose.

REUTERS/Jennifer Gauthier

NEW YORK- Oil prices rose for a fourth day on Wednesday, putting both benchmarks on track for their highest closes in almost nine weeks, on signs of a speedy economic recovery and upbeat forecasts for energy demand.

Brent futures rose $1.09, or 1.6%, to $69.64 a barrel by 9:57 a.m. EDT (1357 GMT), while U.S. West Texas Intermediate (WTI) crude rose $1.08, or 1.7%, to $66.36.

That put WTI on track for its highest close since March 9 and Brent on track for its highest close since March 11.

The price gains came ahead of a report by the U.S. Energy Information Administration (EIA) expected to show a 2.8 million barrel decline in U.S. crude inventories last week. 

If correct, that would confirm data from the American Petroleum Institute (API) industry group late Tuesday that showed U.S. crude stocks fell by 2.5 million barrels in the week to May 7. 

"Oil prices today are experiencing a lift on positive demand outlooks released by OPEC and IEA, which both came out with a similar consensus that oil demand will average 96.4 million barrels per day (bpd) in 2021," said Louise Dickson, oil markets analyst at Rystad Energy.

The International Energy Agency (IEA) said in its monthly report that oil demand is already outstripping supply and the shortfall is expected to widen even if Iran boosts exports as vaccinations against COVID-19 bolster the global economy.

Oil prices were also supported by the outlook from the Organization of the Petroleum Exporting Countries, which on Tuesday stuck to a forecast for a strong recovery in world oil demand in 2021, with growth in China and the United States outweighing the impact of the coronavirus crisis in India. 

India's coronavirus death toll crossed 250,000 in the deadliest 24 hours since the pandemic began. 

In the United States, fuel shortages worsened on Wednesday as the shutdown of the Colonial Pipeline, the nation's largest fuel pipeline network, entered its sixth day and gasoline stations from Florida to Virginia ran out of supply in some cities.

U.S. unleaded gasoline prices hit an average $2.99 a gallon, the highest since November 2014, the American Automobile Association said. 

"While a prolonged outage would be supportive for refined product prices, it could start to weigh on crude oil prices if refiners on the U.S. Gulf Coast are forced to reduce run rates due to a build-up of refined product inventories," ING analysts said.

Colonial, which transports more than 2.5 million barrels per day, has said it hopes to restart a large portion of the network by the end of the week.

Oil also found support from positive U.S. and UK economic data. 

U.S. consumer prices increased by the most in nearly 12 years in April as booming demand amid a reopening economy pushed against supply constraints, which could fuel financial market fears of a lengthy period of higher inflation.

(Additional reporting by Bozorgmehr Sharafedin in London and Shu Zhang and Sonali Paul in Singapore; Editing by Marguerita Choy and Louise Heavens) ((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))

More From Commodities