Larry Berman: A look at the commodity surge in markets
Oil climbed to the highest in two years with optimism building around the comeback of fuel demand in regions such as the U.S., even as COVID-19 flare-ups persist in parts of Asia.
Futures in New York advanced 1.4 per cent on Monday to the highest since April 2019. The U.S. and China, along with parts of Europe, are rapidly recovering from the pandemic as vaccinations increase, overshadowing concerns around weaker consumption in India. In the U.S., the number of passengers at airports jumped to the highest since the pandemic began, a sign of the domestic travel revival that’s leading the way in a jet fuel demand rebound.
For the U.S., “the consensus is building around a very strong summer demand period,” said John Kilduff, a partner at Again Capital LLC. “The supply and demand balance is going to be a little short as we get deeper into the year,” supporting prices.
Oil’s rally of more than 4 per cent this month comes as even the hardest-hit parts of the oil market -- namely, jet fuel -- are showing signs of a revival. The number of people passing through Transportation Security Administration checkpoints at U.S. airports surged to 1.85 million on Sunday -- the highest since March 2020 -- pointing to the recovery in domestic U.S. air travel that’s seen underpinning a summer surge in jet fuel demand. United Airlines Holdings Inc. on Monday said it plans to operate 80 per cent of its pre-pandemic U.S. schedule.
“More reopenings in Europe, consumer confidence and travel normalizing” are all boosting confidence in a demand rebound, said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago. In the U.S., “more and more people are getting vaccinated and those people are now traveling.”
- West Texas Intermediate for June delivery rose 90 cents to settle at US$66.27 a barrel
- Brent for July settlement gained 75 cents to end the session at US$69.46 a barrel, the highest since March 11
The recovery underway in the U.S. is helping offset a tepid recovery in Asia, where the coronavirus is crippling key importer India and Singapore and Taiwan are grappling with new outbreaks. Another wildcard is the prospect of more crude flows from Iran as the nation seeks to revive a nuclear deal and free itself of U.S. sanctions. Talks are ongoing, however, and progress on a solution remains uncertain.
Other oil-market news:
- BP Plc is in advanced talks to sell its 28 per cent interest in the Shearwater field in the U.K. North Sea to Tailwind Energy Ltd., an explorer backed by trading house Mercuria Energy Group Ltd., people familiar with the matter said.
- Crude output at major U.S. shale plays is seen rising to 7.733 million barrels a day in June, the highest since January production of 7.78 million, according to the Energy Information Administration’s monthly Drilling Productivity Report.
- Iranian Oil Minister Bijan Namdar Zanganeh said he will retire when President Hassan Rouhani’s term ends this year, closing a career that started with the birth of the Islamic Republic in 1979 and has often been defined by his country’s turbulent relationship with the U.S.