Oil futures: Brent heads back towards $74/b on reports of thin US supply

London (Quantum Commodity Intelligence) – Brent futures were poised to settle above $73.50/b on Friday after posting a strong rebound in afternoon trade in London amid talk that US supplies would be limited for the rest of the year.

Front-month crude futures rose 2% in the space of 90 minutes after newswire Reuters reported that OPEC officials were told by industry experts not to worry about rising US supply this year, with barrels from the US rising by just 200,000 a day.

That meant Brent crude futures by time of press (1600 GMT) had clawed back all of Thursday's losses and were poised to end the week flat at $74.60/b versus Thursday's close of $73.08/b.

Front-month WTI was trading at $71.98/b, up around 1.3% on the day.

Brent had traded as low as $72.19/b earlier, while WTI had fallen to $70.16/b.

The OPEC panel had been told that US producers, who are normally quick to react to price rises, were focused on "capital discipline and investor returns" according to Reuters.

Futures had crashed on Thursday as jitters have risen regarding the prospect of interest rate hikes to ward off inflation, sending the dollar index above 92.2 points for the first time since mid-April.

Federal Reserve Bank of St. Louis President James Bullard declared that US inflation has been stronger than anticipated, which, combined with reports that an Iranian deal may be closer than thought, sent screens red as longs exited positions.

However, investors and analysts have largely dismissed any possibility of a last-minute pre-election deal after weekend talks in Vienna failed to find a breakthrough.

Structurally, Brent remains firm with the Aug/Sep backwardation around $0.84/b, the widest spread since January 2020 outside of expiry-day volatility.

Daniel Hynes, senior commodity strategist at ANZ commented, "fundamentals suggest the market remains tight. Improving traffic data amid an acceleration of vaccine rollouts has boosted demand for gasoline and diesel in Europe and the US."

Iran's Presidential elections take place Friday, but the new government will not take power until early August.

Some market analysts have said that if a hardline regime takes power the JCPOA nuclear talks could be further delayed.