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UPDATE 8-Oil on track for near 2-year high on rising demand outlooks

UPDATE 8-Oil on track for near 2-year high on rising demand outlooks

05/12/2021 01:54
UPDATE 8-Oil on track for near 2-year high on rising demand outlooks

Adds U.S. EIA inventory report

By Scott DiSavino

- Oil prices jumped on Wednesday, putting Brent on track for its highest close in almost two years on signs of a speedy economic recovery and upbeat forecasts for energy demand.

Brent LCOc1 futures rose $1.12, or 1.6%, to $69.67 a barrel by 10:44 a.m. EDT (1444 GMT), while U.S. West Texas Intermediate (WTI) crude CLc1 rose $1.10, or 1.7%, to $66.38.

Gains soon after the release of the weekly inventory data put WTI on course for its highest close since Oct. 29, 2018 and Brent for its highest close since May 28, 2019.

Those price gains came despite a smaller than expected U.S. weekly crude inventory draw and a surprise increase in the gasoline stockpile.

“At this time of year we should be burning through a lot of gasoline and that’s not what this report is showing," Bob Yawger, director of energy futures at Mizuho, said, noting he did not "think there’s a skew to the data due to the Colonial (pipeline) outage."

The U.S. Energy Information Administration (EIA) said crude inventories declined 0.4 million barrels last week versus an expected 2.8 million barrel draw. Gasoline inventories, meanwhile, rose by a surprise 0.4 million barrels versus an expected 0.6 million barrel decline. EIA/S ENERGYUSA

"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. nL1N2MZ0KI

Oil prices were also buoyed 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.nL1N2MY0US

India's coronavirus death toll crossed 250,000 in the deadliest 24 hours since the pandemic began. nL1N2MZ087

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. nL1N2MZ0XA nL1N2MY0WQ

"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 in a note.

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 British economic data. nL8N2MZ209

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. This could fuel financial market fears of a lengthy period of higher inflation. nL1N2MZ15U

Call on OPEC+ crude vs. productionhttps://tmsnrt.rs/3hgBzxD

Global oil supplyhttps://tmsnrt.rs/33DVYEF

(Additional reporting by Laura Sanicola in New York, Bozorgmehr Sharafedin in London and Shu Zhang and Sonali Paul in Singapore; Editing by Louise Heavens and Mark Heinrich)

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