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The oil market remains in positive territory with sentiment and stronger fundamentals driving the trend.

Despite an increase in US fuel stockpiles, West Texas Intermediate (WTI) is holding above US$70 a barrel with Brent crude close to US$73 a barrel at end of week trading.

The expected volatility remains in the market with every headline impacting the price.

Higher inventories dampened the price slightly towards the end of the week as did rumours of a settlement in the Iran nuclear talks.

Hopes for a recovery

The focus on the return of growth in the global economy remains strong and hopes for a recovery in fuel and crude demand are materializing.

The past three weeks have delivered a solid performance in the oil market with rising vaccinations and easing of pandemic restrictions in many countries.

With prices back at 2018 and 2019 levels, investment bank Goldman Sachs says it expects Brent crude to hit US$80 a barrel this summer.

The CEO of C-Markits, Yousef Alshammari says the strength in the market is “supported mainly by expectations of demand growth over the summer and inflation levels keeping the US dollar index at low levels”.

He also notes that with Iranian negotiations stalled until August, the market will not expect additional supply.

Looking at production from the US markets, Alshammari says he sees no change, “despite the significant rise in prices, a major return in the US shale production is not expected this year given the low number of the US oil rigs”.

This month’s report from the US Energy Information Administration saw crude inventories down and refinery runs above 90% for the first time in a year.

The International Energy Agency and OPEC both delivered their monthly oil reports this week with the IEA now saying it expects extra demands on the OPEC+ group.

Oil demand expected to rise in 2022

The report said that oil demand in 2022 is expected to rise and suggests OPEC+ will need “to ramp up crude supply by 1.4 million barrels per day above its July 2021 – March 2022 target”.

The IEA is clear about a rise in global oil demand but this has industry analysts questioning its mid-May scenario report, calling for a halt to funding for new hydrocarbon projects if the world is to contain emissions and manage climate change.

OPEC’s monthly oil report expects the global economy to pick up pace in the second half of the year, keeping oil demand growth the same as last month.

Total oil demand for 2021 is expected at 96.58 million barrels a day. OPEC also sees the global economy growing for 2021 at 5.5%, same as last month.

The report noted that while “global economic recovery has been delayed due to the resurgence of COVID-19 infections and renewed lockdowns in key economies,” the ongoing vaccination efforts and easing of restrictions, “lend optimism that the pandemic could be contained in the few months to come”.

OPEC expects total world oil demand to reach 99 million barrels a day in the second half of this year.

As we sit near the mid-way point of the year, the recovery in the oil market by about 40% has been welcomed as has the perhaps, slower recovery in the global economy.

Uncertainty still rules the day, but positive sentiment for a strong second half appears to be driving the market.