Oil rose on Wednesday, supported by an OPEC+ decision to stick to its plan to restore supply to the market gradually and by the slow pace of nuclear talks between Iran and the United States.
Brent crude futures settled 1.57% higher at $71.35 per barrel. U.S. West Texas Intermediate (WTI) crude futures advanced 1.64% to settle at $68.83 per barrel, the highest level since Oct. 2018.
"The strong demand dynamics and likely delays in the Iran nuclear deal negotiations pushed oil prices above the much-watched $70 per barrel level," said Norbert Rucker, analyst at Swiss bank Julius Baer.
"We expect oil prices to move well beyond $70 per barrel towards mid-year."
Expecting a recovery in demand, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, agreed on Tuesday to keep to their plan for a gradual easing of supply curbs through July.
Saudi Energy Minister Prince Abdulaziz bin Salman said there has been solid demand recovery in the United States and China and he believes that the pace of COVID-19 vaccine rollouts can only lead to further rebalancing of the global oil market.
"The market is optimistic that growing summer travel and reopening economies will easily accommodate additional OPEC+ production increases and even a possible Iranian return to the market," said Stephen Brennock of oil broker PVM.
Analysts also say that the slow progress of Iran nuclear talks provides breathing room for demand to catch up before Iranian oil returns to the market.
Two Western diplomats and an Iranian official said the talks are likely to pause on Thursday, but it was unclear if they would resume before Iran's June 18 presidential election.
"The delay is pushing the threat of another 2 million barrels per day of oil (returning to the market) to later in the year, when further economic growth should buffer its impact," ANZ Research analysts said in a note.
OPEC Secretary General Mohammad Barkindo also played down any potential disruption to the market, saying the group expected any return of Iranian exports to "occur in an orderly and transparent fashion" if and when a nuclear deal is reached.
Investors will also be on the lookout for weekly inventory data from the American Petroleum Institute, due later on Wednesday, and from the U.S. Energy Information Administration on Thursday.