0312 GMT: Crude oil futures hit fresh multiyear highs during midmorning Asia trade June 9 as the US Energy Information Administration forecast a decline in global oil inventories in the second half of 2021 in its June Short-Term Energy Outlook. The rally was further supported by signs that the US-Iran talks, which could bring sanctioned Iranian barrels back into the market, would take longer than expected.
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At 11:12 am Singapore time (0312 GMT), the ICE August Brent futures contract was up 50 cents/b (0.69%) from the previous settle at $72.72/b while the NYMEX July light sweet crude contract was up 47 cents/b (0.67%) at $70.52/b.
Both contracts touched multiyear highs June 4 before settling lower. The ICE Brent contract last settled higher at $71.97/b on May 20, 2019, while the NYMEX light sweet crude contract was last higher at $69.49/b on July 19, 2018, S&P Global Platts data showed.
Prices regained their upward momentum as EIA's STEO, released June 8, reinforced expectations of a demand-led recovery in the oil markets that would result in a drawdown of global oil inventories.
"Brent crude has once again hit its two-year high, with sentiments potentially supported by EIA June's forecasts which reinforces the narrative of declining global oil inventories and a continued recovery in global oil consumption demand," said Yeap Jun Rong, market strategist at IG, in a June 9 note.
Global oil production is expected to match the rising levels of global oil consumption, with oil production increasing largely as a result of easing OPEC+ production cuts, according to the STEO.
"We expect rising production will end the persistent global oil inventory draws that have occurred for much of the past year and lead to relatively balanced global oil markets in the second half of 2021," the EIA said in the report.
Furthermore adding to the bullish sentiment, the American Petroleum Institute reported an estimated 2.1 million-barrel draw in US crude oil inventories in the week ended June 4.
While the drawdown was tempered by a 2.4 million-barrel build in gasoline stocks and a 3.8 million-barrel build in distillate inventories during the same period, participants shrugged off concerns and kept their focus on strengthening fundamentals.
"There is an optimism around the demand outlook that is supporting the market. COVID cases have been declining since April and the US recently eased its travel warning, which although may not lead to immediate recovery, but is a step in right direction," Warren Patterson, head of commodities at ING, told Platts on June 9.
On the supply side, US-Iran negotiations to potentially lift sanctions on Iranian crude seemed unlikely to wrap up soon. This was also keeping the sentiment supported in the oil markets.
"It seems talks could drag on much longer which means the timeline for additional output from Iran keeps getting pushed back," said Edward Moya, senior market analyst at OANDA, in a June 9 note.
Meanwhile, the market continues to await OPEC's and the International Energy Agency's June Oil Market Reports, due to be released June 10 and June 11, respectively, to get a better sense of supply and demand fundamentals going forward.