Oil prices extended their recent (meteoric) rise with WTI topping $72 - 32 month highs - as investors weighed the outlook for rising demand (hopes on gasoline and aviation fuel use rise from pandemic lows and global stockpiles are drawn down) against extended anti-virus curbs in some economies (with officials tackling the challenge posed by more infectious variants).
"The continuing good news on the demand front and upbeat sentiment on the financial markets as the key reasons for the latest upswing," Commerzbank analyst Eugen Weinberg said in a note.
" ... In our opinion, however, the crucial (fundamental) test for the oil market and its subsequent price performance is yet to come - will demand continue to recover as dynamically as it has been doing in recent weeks despite the new virus variants that keep sparking renewed restrictions?"
The latest test for this thesis will be tonight's inventory sneak peek ahead of tomorrow's official data.
Crude -8.537mm (-4.2mm exp) - biggest draw since January
Gasoline +2.852mm (unch exp)
Distillates +1.956mm (+200k exp)
Analysts expected crude stocks to fall for the 4th straight week and were right as Crude stocks fell by the most since January (as product inventories rose for the 3rd straight week)...
WTI hovered around $72.25 (the highest since Oct 2018) ahead of the print and spiked higher on the big crude draw...
"The fact that oil prices are still showing few signs of slowing means there has to be some concern that if we go too much higher, we could start to see some early signs of demand destruction," said Michael Hewson, chief market analyst at CMC Markets UK.
"For now, that doesn't appear to be happening, but we've still made another 24-month high on Brent, pushing us closer to $75 a barrel and the highs from 2019," he said in a market update.
"If we go much above $80 that picture could change quite quickly."
Finally we note that brent crude prices have been tracking - almost perfectly - the optimistic rebound in global macro data...
And as OilPrice.com's Tsvetana Paraskova notes, although oil may not be headed to a new supercycle, prices still have room to rise from current levels because of a strong demand rebound and expected tightness in supply, some of the world's largest commodity trading groups say.
There is a chance for $100 oil, Jeremy Weir, chief executive officer at commodity trader Trafigura, told the FT Commodities Global Summit on Tuesday.
"You need higher prices to incentivize… and also maybe to build on the cost of carbon in the future as well. You also need to attract capital in the business," Weir told the online debate.
The largest commodity traders are bullish on oil in the near term, too.
Brent Crude traded at over $73.50 a barrel early on Tuesday, but the top executives of the trading houses see further upsides.
"Higher from here" for the next six months, Glencore's Head of Oil Marketing, Alex Sanna, told the same event today. According to Sanna, better news about vaccination programs, inflation bringing in investor cash, and the demand recovery will all contribute to rising oil prices.