(Bloomberg) — Oil climbed above $73 a barrel, paring a weekly loss, after data showing a slump in U.S. stockpiles and record fuel demand highlighted the recovery in consumption that’s underpinned this year’s crude rally.
West Texas Intermediate was 0.6% higher in Asian trading following a 1% rise on Thursday. and gasoline supplies tumbled last week, while a gauge of fuel demand surged to 10 million barrels a day in the week leading up to the July 4th holiday, according to the Energy Information Administration.
Still, the U.S. benchmark remains on course for the first weekly decline since mid-May. Prices have been burdened this week by a dispute between the United Arab Emirates and Saudi Arabia that’s clouded the outlook for supplies from the Organization of Petroleum Exporting Countries and its allies. In addition, a stronger dollar, investors backtracking on reflation bets, and concerns about the spread of the delta coronavirus variant have also posed headwinds.
After an 11% gain in last month, July has proved to be more challenging for oil, driven by rising uncertainties for both supply and demand. While the dispute at OPEC+ may prompt the cartel to leave output steady in August, further tightening the global market, there’s also scope for members adding barrels unilaterally. At the same time, reopenings in the U.S. and Europe are aiding energy consumption, but rising infections from the delta strain pose a risk.
The market’s pricing patterns still suggest tightness. Brent’s prompt time spread was 84 cents a barrel in backwardation, with near-term prices above those further out. That compares with 47 cents a month earlier. Year-to-date, the global oil benchmark has rallied 44%.
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