Oil prices reach highest level in over 2 years as demand rebounds
WTI crude oil reached $71.62 a barrel
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Maglan Capital President David Tawil discusses the state of the oil industry
Oil prices climbed to their highest level in more than two years Monday amid more evidence of increasing demand as the global economy reopens from COVID-19 lockdowns.
West Texas Intermediate crude oil, the U.S. benchmark, climbed 71 cents to $71.62 a barrel, the highest since October 2018. Brent crude, the international standard, was up 67 cents at $73.36 a barrel, the highest since April 2019.
"The United States is reopening and many people are going to start going back to work, increasing demand," said Phil Flynn, senior market analyst at the Price Futures Group. "There are expectations that we're going to see the oil demand get back to pre-covid levels before the end of the year."
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The International Energy Agency on Friday urged OPEC and its allies to increase production to pre-pandemic levels at a faster pace than planned. The group earlier this month announced a production increase that would have output at 5.8 million barrels per day below pre-COVID levels.
The so-called OPEC+ group slashed production by a record 9.7 million bpd in January 2020 due to the demand destruction caused by COVID-19.
OPEC+ has been wary in restoring production too quickly as an Iran nuclear deal would bring more oil onto the market, but prospects for an agreement are fading as the "Iranian election seems to be suggesting a hardliner could be the next Iranian president," Flynn said.
Meanwhile, major oil companies are looking to move away from fossil fuels, calling into question the future of U.S. production.
Royal Dutch Shell is considering selling its assets in the Permian Basin, the largest oilfield in the U.S., according to a Reuters report released Monday.
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U.S. production has in recent years been seen as a means of keeping global oil prices in check as shale producers could increase supply to meet record global demand.
"The global oil market supply versus demand looks a lot tighter than it has in many, many years and that is keeping oil prices on this upward track," Flynn said.