Oil prices hit new high near $75 on demand rise, falling inventories

Oil extended its run of gains on Wednesday, climbing towards $75 a barrel to its highest since April 2019, supported by a recovery in demand from the pandemic and a drop in U.S. crude inventories.

The American Petroleum Institute reported U.S. crude inventories fell 8.5 million barrels, two market sources said, more than analysts forecast. [API/S] Official Energy Information Administration figures are out at 1430 GMT. [EIA/S]

Brent crude was up 29 cents, or 0.4%, at $74.28 a barrel by 0815 GMT, and earlier reached $74.73, the highest since April 2019. U.S. crude gained 32 cents, or 0.4%, to $72.44 and hit $72.83, the highest since October 2018.

"Demand growth is outpacing supply and will continue to do so over the coming months," said Stephen Brennock of oil broker PVM.

Brent has risen 44% this year, supported by supply cuts led by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, and a demand recovery expected to gather pace in the second half. [OPEC/M] [IEA/M]

Despite some easing of last year's record output cuts made when the pandemic took hold, OPEC+ is still withholding millions of barrels of daily supply from the market.

"Even non-energy traders are placing bets that oil prices will continue to rise," said Edward Moya, senior market analyst at brokerage OANDA.

Executives from major oil traders said on Tuesday they expected prices to remain above $70 and demand to return to pre-pandemic levels in the second half of 2022.

At the same time, the prospect of an imminent rise in Iranian oil exports looks less likely, analysts said. Indirect talks between Tehran and Washington on resuming the 2015 nuclear accord resumed in Vienna on Saturday.

"Ongoing efforts to revive the Iranian nuclear deal have so far failed to bear any fruits," PVM's Brennock said.

(Additional reporting by Aaron Sheldrick; editing by Jason Neely)