Oil runs into resistance at $70 ahead of OPEC, inventory reports

Oil tested big resistance at $70 this week as prices hit their highest since before the pandemic, however a lack of momentum has seen WTI ease back ahead of the OPEC monthly report this week and the usual EIA crude oil inventories report. 

Three-year high for WTI

WTI and Brent contracts rose sharply last week to make new highs as OPEC+ stuck to its plan to only slowly raise the level of output through to July. Whilst vaccines and the reopening of economies have left the market in deficit, helping to drive prices up 35% this year, the persistence of cases in some parts of the world combined with ongoing travel restrictions in Europe/US means there are still doubts about how quickly demand will recover this year.  

Nevertheless, prices hit their highest in almost three years on Monday as the situation in India in terms of covid cases seemed to improve, whilst the post-OPEC bounce held firm. 

Thursday sees the release of the latest OPEC monthly oil market report.  Last month’s report saw the cartel reiterate its belief in a strong recovery in world oil demand in the second half of 2021. This month’s report is not expected to show much change from the previous version, which said demand will rise by 5.95m bpd this year, up 6.6% from 2020 levels. 

Ahead of this, traders will look to Wednesday’s inventory report from the Energy Information Administration (EIA). Last week’s EIA inventory report showed stockpiles declined by 5.1m barrels, a larger-than-expected draw that helped to support the bullish view on oil prices as demand in the US recovers.  

OPEC in control? 

The world’s largest oil trader said this week that the US has handed back control of the oil market to rivals. 

OPEC+ seem to have the handle on crude prices as S. production has failed to catch up to pre-pandemic levels, Mike Muller, Vitol’s head of Asia, said at an online conference. “There’s a perception in the market that control is with OPEC+,” Muller said at the Gulf Intelligence event. “It will take a long time for US oil to come back.” 

Meanwhile traders are also eyeing Iranian oil coming back on stream as a potential nuclear deal moves tentatively closer.