Oil hits two-year high above $72 on OPEC+ discipline, demand hopes

Oil pumping jacks, also known as "nodding donkeys", are reflected in a puddle as they operate in an oilfield near Almetyevsk, Russia, on Sunday, Aug. 16, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Oil extended gains on Friday, topping $72 a barrel for the first time since 2019, as OPEC+ supply discipline and recovering demand countered concerns about patchy COVID-19 vaccination rollout around the globe.

The Organization of the Petroleum Exporting Countries (OPEC) and allies on Tuesday said they would stick to agreed supply restraints. A weekly supply report on Thursday showed U.S. crude inventories dropped more than expected last week.

Brent crude rose 0.8% to settle at $71.89. It reached an intra-day high of $72.17, the highest since May 2019. U.S. West Texas Intermediate crude gained 1.18% to settle at $69.62 per barrel and earlier touched $69.76, the highest since October 2018.

"After much dilly-dallying, Brent appears to have found a new home above $70," said Stephen Brennock of oil broker PVM. "Summer and the reopening of the global economy is bullish for oil demand in the second half of the year."

Brent is on track for a gain on the week of more than 3.2% and U.S. crude is heading for a 5% rise. It is the second week of gains for both contracts.

"Oil prices are finding a tailwind from the clear signs that demand is making a solid recovery," Commerzbank said.

Also boosting oil this week was a slowdown in talks between the United States and Iran over Tehran's nuclear programme, which reduced expectations of a rise in Iranian oil supply.

Oil extended gains after U.S. jobs figures showed nonfarm payrolls increased by 559,000 jobs last month. The U.S. dollar weakened after the report, making oil cheaper for holders of other currencies and lending support to oil prices.

While rising demand and the fast pace of vaccinations in countries such as the United States have boosted oil, a slower inoculation rollout and high infections in the likes of Brazil and India are hitting demand in high-growth oil markets.