Oil prices increased on Thursday to the highest level in almost a month, after rising 5% in the previous session.
The rise in the price was driven by increased demand forecasts from the International Energy Agency (IEA) and OPEC as major economies recover from the coronavirus pandemic.
Brent crude rose by 16 cents at $66.74 a barrel by 0659 GMT Thursday, after reaching $66.94 earlier, marking the highest since March 18, and gaining 4.6% a day earlier.
Also, US West Texas Intermediate futures went up 12 cents to $63.27 a barrel, earlier increasing to $63.48, also the highest since March 18. The contract had a rise of 4.9% in the previous session.
Goldman Sachs analysts said, in a report, that supply discipline and rebounding economies are slated to give oil a chance to break out of the recent range.
“We remain positive on Brent oil forecasting US$80/bbl in 3Q21 on a near-term demand recovery and supply discipline,” Goldman analysts said.
Meanwhile, the International Information Association revised the outlook for global oil demand in 2021 to 96.7m barrels per day up from 96.5 prior.
In addition, the US investment bank brought forward its predicted peak for global oil transport demand by one year to 2026, because of the rising penetration of electric vehicles as economies push for decarbonisation.
Even so, it does not predict peak oil demand this decade due to growth in petrochemicals and aviation fuel markets, although it forecast overall oil demand beyond 2025 “to be anaemic mainly due to electrification”.
On Wednesday, the Paris-based IEA predicted a rebalancing of supply and demand during the second half of the year, noting market “fundamentals look decidedly stronger” in comparison to April last year.
“The massive overhang in global oil inventories that build up during last year’s COVID-19 demand shock is being worked off,” it added.
Also, the Organization of the Petroleum Exporting Countries (OPEC) this week raised its forecast for global oil demand this year.
OPEC, which has been withholding supply in tandem with other producers including Russia, expects demand to increase by 70,000 bpd from last month’s forecast, noting global demand is liable to rise by 5.95 million bpd in 2021.
Chris Beauchamp, chief market analyst at IG, said: “Such upgrades to demand forecasts are vital if oil is to keep rallying, since much of the good news has already been priced in thanks to the 80% rise from the pre-election low. The recent upsets to vaccination plans are being viewed as temporary, and overall demand should still keep recovering as the year goes on.”