API stocks plunged 8.5 million barrels, demand expectations improved, the oil rally exceeded the 72 mark

Oil futures rose $1.32, 1.81 percent, to settle at $72.48 a barrel on Tuesday. The intraday high of $72.49 / BBL was the highest since October 2018. U.S. API crude inventories fell 8.537 million barrels in the week ended June 11, the fourth straight weekly decline the steeper drop since January.

Brent crude futures rose $1.24, 1.93%, to settle at $74.27 a barrel. It hit $74.33 a barrel, the highest since April 2019.

The American Petroleum Institute reported that crude oil stocks plunged by 8.5 million barrels in the week ended June 11, while gasoline stocks rose by 2.85 million barrels distillate stocks rose by 1.96 million barrels.

"Everyone is assessing a situation demand is rising producers remain hesitant to add supply," said John Kilduff, a partner at Again Capital, LLC in New York. As a result, a structural supply-demand gap is developing.

Oil prices were given a boost on Tuesday when several of the world's largest oil traders said they expected prices to remain above $70 a barrel, with demand expected to return to pre-COVID-19 levels in the second half of 2022.

Vitro CEO Russell Hardy said he expects oil prices to range between $70 $80 a barrel for the rest of 2021 as OPEC its Allies are expected to keep supply constraints in place, although Iranian exports could recover if the United States returns to the nuclear deal. Although demand for diesel petrochemicals has returned to pre-outbreak levels, oil prices have "a little bit of room to run".

Speaking at the Financial Times Global Commodities Summit, Glencore Vitol Group both said they expected oil prices to rise further. Jeremy Weir, chief executive of Trafigura Group, said crude prices could even hit $100 a barrel as inventories fall ahead of peak global oil demand. Speaking at the summit, Glencore's Alex Sanna said global demand would return to normal in the third quarter of next year, with crude prices likely to move higher due to wider vaccination inflationary pressures.

At the same time, money continues to shift more broadly into commodities. Bully commodity bets have overtaken bitcoin investments as the most crowded trade in the market, according to Bank of America's monthly survey of fund managers.

Michael Hewson, chief UK market analyst at CMC Markets, said oil prices were still showing few signs of slowing, which meant there had to be concerns that if prices rose too high they might start to see some early signs of demand being hit. That doesn't seem to be happening yet, but that could change if oil prices get much higher than $80.

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Source: International Petroleum Network