Oil jumped to a two-year high above $72 a barrel on Monday, extending this year’s rally supported by recovering demand and OPEC+ supply curbs, before giving up the gains as investors took profits.
Demand is rising in the United States and Europe as COVID-19 restrictions are loosened and, in another hopeful step for fuel use, India eases its lockdown.
OPEC and its allies are sticking to agreed supply restraints through July.
Brent crude hit $72.27, the highest since May 2019, but by 1350 GMT was down by 6 cents, or 0.1%, to $71.83. U.S. West Texas Intermediate touched $70 for the first time since October 2018 and was last up 10 cents or 0.1% to $69.72.
“Oil demand has been rising this year and many traders have bet on the expected summer uptick, buying oil at cheaper prices before and now reaping the profits,” said analyst Louise Dickson of Rystad Energy.
“The strong levels are here to stay.”
Crude has risen for the past two weeks, and Brent is up by more than 37% this year, helped by supply curbs by the Organization of the Petroleum Exporting Countries and allies and demand recovering in part.
“With some improvement in the pandemic situation in India and the recovery in the U.S., China and Europe remaining on track, oil should remain a buy on dips,” said Jeffrey Halley, analyst at brokerage OANDA.
Investors may have sold off some contracts when WTI hit $70, said Avtar Sandu of Phillips Futures in Singapore. The chance of more Iranian supply and a drop in China’s crude imports also weighed, analysts said.
Nonetheless, there is still solid price support from both the demand and supply sides, Commerzbank said.
“The tailwind that oil prices are currently finding from virtually all sides remains strong,” said Commerzbank analyst Eugen Weinberg, calling Monday’s price correction “hardly surprising” after recent gains.