Oil posted its biggest weekly gain since the middle of April ahead of the U.S. Memorial Day weekend that kicks off the country’s summer driving season.

West Texas Intermediate rose 4.3 per cent this week. A spate of positive U.S. economic data this week continued to highlight the recovery taking shape in the world’s largest oil-consuming country, while Americans are expected to unleash demand built up during the pandemic from this weekend onward.

With more drivers taking to the road and with some of the lowest gasoline stockpiles in almost 30 years, some see the U.S. facing a supply squeeze on par with those seen when a hurricane knocks out oil refineries in Texas and Louisiana.

“The demand outlook appears very robust, especially in the U.S., and it’s really improving in Europe as well,” said Edward Moya, senior market analyst at Oanda Corp. “There’s optimism that the advanced economies are going to have Covid in the reaview mirror by the end of the summer.”

Still, futures declined on Friday, snapping a five-day winning streak, as prices have remained stuck in a US$10 range since March. Supply concerns remain over international talks to revive the Iran nuclear accord, which could pave the way for more oil flowing from the country. At the same time, the Organization of Petroleum Exporting Countries and its allies meet next week, with delegates saying the alliance looks set to rubberstamp oil-output increases.

“The most immediate risk to the upside would be an agreement at the nuclear talks between world powers and Iran in Vienna,” Bob Yawger, head of the futures division at Mizuho Securities, said in a note. “Nobody wants to get caught long over the weekend and see an agreement get done.”

Prices:

• WTI for July delivery declined 53 cents to settle at US$66.32 a barrel
• Brent for July settlement, which expires Friday, was up 17 cents at US$69.63 a barrel

The more active August contract lost 48 cents to US$68.72 a barrel

Ministers from the OPEC+ alliance are set to meet on June 1 to assess the global market and their production policy. All but four of 24 analysts and traders surveyed by Bloomberg predict they’ll ratify an 840,000-barrel-a-day increase scheduled for July, completing a three-part process to revive just over 2 million barrels this summer.

The market’s positive outlook is reflected in WTI’s longer-term spreads. The price of the U.S. benchmark for December 2021 was US$4.75 a barrel higher than futures for the same month in 2022. The differential has expanded by almost US$1 this week to hit the highest since mid-March.

Related coverage:

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• A series of blows delivered to some of the world’s biggest oil companies this week by shareholders and a Dutch court shows the industry faces a higher credit risk, Moody’s Investors Service said.
• China’s efforts to rein in surging commodities prices are likely to be in vain as it’s lost the ability to boss the market around, according to two of Wall Street’s biggest firms.