Oil prices climbed on Friday as the International Energy Agency boosted optimism about global oil demand recovery, Oilprice said. Oil rises for third week on positive economic news in the U.S. and accelerating global vaccination campaigns. The road traffic in the U.S. and much of Europe is largely back to levels seen before the pandemic. 

The International Energy Agency said it expects global oil demand to return to pre-COVID-19 pandemic levels by the end of next year. Producers will need to increase output to keep up with demand recovery, the Paris-based energy agency said in its June oil market report. It forecasts demand to rise in 2021 before growing at a faster rate next year, reaching 100.6 million barrels a day by the end of 2022. After declining by 8.6 mb/d in 2020, oil demand will rebound by 5.4 mb/d this year, and by another 3.1 mb/d next year. The agency reiterated that OPEC and its allies needed to “open the taps” to boost oil production and keep the world well supplied.

Rystad Energy warned that there is going to be rising pressure on OPEC+ to loosen production constraints in order to avoid the oil market overheating.  The market “can’t ignore the clearly bullish signal” from the IEA report, in which the IEA calls for more oil to be produced by OPEC+, the Organization of the Petroleum Exporting Countries and their allies, “to meet the oil demand recovery of 2022,” said Louise Dickson, oil markets analyst at Rystad Energy.

“Supply conservatism by OPEC+ has supported oil prices since last year and is the reason prices have now reached such highs,” she said. “There is definitely room for OPEC+ to boost output from the second part of this year and as long as this doesn’t happen, there is a definite upside for oil prices.”

Meanwhile, the U.S. Department of the Treasury said on Thursday it is removing several Iranian officials from its list of designated persons, including three directors of the National Iranian Oil Company (NIOC). While U.S. crude futures have held above the key $70-a-barrel level, traders are grappling with the prospects of Iranian supply returning to the market. Talks between the Persian Gulf nation and world powers about a 2015 nuclear deal are set to resume over the weekend. There are also risks to the demand outlook in parts of Asia and Latin America as many nations continue to grapple with COVID-19 cases, Bloomberg noticed. The IEA said OPEC+ will need to add about 1.4 million barrels a day — less if Iran clinches a deal to remove U.S. sanctions. That would leave the group with another 5.5 million barrels a day of capacity offline, it said, though Bloomberg calculations suggest the buffer isn’t quite as high.