Brent crude slips, but stays near $70 as demand recovery hopes lend support

A worker watches as a pice of drill pipe is lifted onto a drilling rig near Midland, Texas February 12, 2019.
Nick Oxford | Reuters

Brent crude prices eased on Friday but hovered near $70 a barrel as production cuts by major oil producers constrained supply, with optimism about a recovery in demand for the resource in the second half of the year also lending support.

Brent crude futures for May slipped 13 cents, or 0.2%, to $69.50 a barrel while U.S. West Texas Intermediate crude for April was at $65.88 a barrel, down 14 cents, or 0.26%.

Front-month Brent is on track to post weekly gains for the eighth week after touching a 13-month high on Monday following attacks on Saudi Arabian oil facilities.

Sentiment was also buoyed by the decision of the Organization of Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, earlier this month to largely hold production cuts in April.

Investors have been pumping funds into commodities such as oil on expectations of a demand recovery in the second half of the year as the global economy grows while a wider rollout of vaccines against the Covid-19 pandemic allows more people to travel this summer.

"Assuming vaccination programmes are successful, we expect pent-up demand for gasoline to be released this summer during the U.S. and European driving season," FGE analysts said in a note.

RBC Capital analysts said the fundamentals for summer gasoline is the most bullish in nearly a decade.

"We think this will support the entire oil complex this summer and beyond."

The United States, world's largest oil consumer, saw a massive draw on U.S. gasoline stocks last week as the winter storm in Texas disrupted refining output.

OPEC said on Thursday a recovery in oil demand will be focused on the second half of the year.