(Bloomberg) — Oil extended a rally after U.S. stockpiles fell and investors applauded reopening drives in the U.S. and Europe that will aid demand.
West Texas Intermediate surged 1.2% at the open, the most since Nov. 4, and gasoline futures hit the highest since July 2018. The American Petroleum Institute reported domestic crude supplies fell by 7.69 million barrels last week, according to people familiar with the data. If confirmed by U.S. government figures on Wednesday, that would be the largest drop since late January. The API report also showed lower gasoline and distillate inventories.
Aiding the outlook for improved oil consumption, the U.S. is setting a new target of 70% of U.S. adults receiving at least one Covid-19 vaccine shot by July 4, while British Prime Minister Boris Johnson said his country’s lockdown rules are will be scrapped in seven weeks. That’s offsetting concerns about weaker demand in parts of virus-hit Asia, including key importer India.
U.S. futures are up more than 36% this year — amid a broad rally across commodities — as investors bet the rollout of vaccines will permit a return to pre-pandemic conditions in key economies. The European Union plans to ease curbs for vaccinated travelers this summer, while New York will lift most virus restrictions this month. The world’s 20 major economies are set to back efforts to introduce so-called vaccine passports to boost travel and tourism.
Crude’s gains have come despite the worsening Covid-19 crisis in India, as well as outbreaks elsewhere in Asia. India’s wave has the potential to worsen in the coming weeks, with some research models projecting that the death toll could more than double from current levels.
Still, Brent’s pricing patterns reflect the market’s bullishness, with near-term contracts trading above those further out. The prompt timespread was 45 cents a barrel in backwardation compared with 32 cents a month ago. In addition, the December 2021 contract was $4.05 more costly than the same month in 2022.
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