Oil rallies last week as OPEC notes "ongoing strengthening of market fundamentals"

The oil market saw a strong rally last week with prices at their highest in three years. Optimism for economic recovery and growing oil demand is driving sentiment with Brent crude topping US$72 a barrel. The main benchmark finished the week a little below this price with West Texas Intermediate  WTI holding close to US$70 a barrel. Among the highlights of the week was possibly the shortest OPEC meeting on record when OPEC and friends gathered virtually to agree on their measured return of oil to the market. Proceeding as planned In less than half an hour, ministers announced that they would proceed as planned and return more than 2 million barrels to the market "with the pace being determined according to market conditions". When asked about continued investment in hydrocarbons, the Saudi Arabia Energy Minister, Prince Abdulaziz bin Salman said his country was determined to continue investing and grow capacity adding that any plans to the contrary would be like a "sequel to la-la land movie". This was in reference to the recent International Energy Agency’s scenario that all hydrocarbon investment and exploration should stop immediately. When asked about the move to cleaner energy the Prince added that his country was a low-cost producer and "that Saudi Arabia is no longer an oil country, it's an energy producing country". There’s still no decision from the ongoing Iran nuclear talks in Vienna about possible lifting of sanctions. Prince Abdulaziz refused to be drawn on the possible change in situation in the event of more Iranian barrels on the market. He reaffirmed the group's commitment to monthly meetings and constant monitoring of any changes in oil demand and supply. When pressed with perceived tightness in the market, he said he was more concerned about what was happening today than in the future and said he was committed to the joint agreement already in place until 2022. Clear signs of improvement In a statement released after the meeting, OPEC said it noted "the ongoing strengthening of market fundamentals, with oil demand showing clear signs of improvement and OECD stocks falling as the economic recovery continued in most parts of the world as vaccination programmes accelerated". The Prince joined the OPEC+ co-chair and Russia’s Deputy Prime Minister, Alexander Novak at the St. Petersburg International Economic Forum this week where the focus remained on economic recovery and oil supply. Novak was in agreement with Saudi Arabia when asked about the IEA scenario, telling CNBC that it was “a simplistic approach,” and calling it "unrealistic". Like his counterpart in Saudi Arabia, Novak said that Russia would invest in renewables, but said the country would continue “to invest in both oil and gas and in coal,” and remain a "world leader in the fossil fuel market". The recovery in the oil market and in the oil price has been steady and positive as we reach the half way point of the year. Investment banks are reviewing their oil price projections but as we look towards the US driving season and elements of recovery around the world, sentiment looks steady and demand looks likely to increase.