Oil prices gained on Monday for a fifth straight day, with Brent at its highest since October 2018 and heading for $80, as investors fretted about tighter supplies because of rising demand in parts of the world.
Brent crude, Nigeria’s oil benchmark, rose $1.38, or 1.8 per cent, to $79.47 a barrel, having posted three straight weeks of gains.
Similarly, United States crude futures rose $1.44, or 2 per cent, to $75.42 a barrel, its highest since July, after rising for a fifth straight week. Goldman Sachs raised by $10 its year-end forecast for Brent crude to $90 per barrel.
Global supplies have tightened due to the fast recovery of fuel demand from the outbreak of the Delta variant of the coronavirus and Hurricane Ida’s hit to U.S. production. “While we have long held a bullish oil view, the current global supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts,” Goldman said.
Caught short by the demand rebound, members of the Organisation of Petroleum Exporting Countries (OPEC) and their allies, known as OPEC+, have had difficulty raising output as underinvestment or maintenance delays persist from the pandemic.
“The rise of oil prices is continuing beyond what even most bullish traders would dream just months ago, and Brent hurtling towards the threshold of $80 per barrel is reflective of the extraordinarily tight crude market,” said Louise Dickson, senior oil markets analyst at Rystad Energy.
“U.S. supply constraints will continue to provide upside to oil prices, as Ida-related outages will still affect U.S. supply in the first quarter of 2022,” the Rystad official stressed.
Global oil demand is expected to reach pre-pandemic levels by early next year as the economy recovers, although spare refining capacity could weigh on the outlook.
Global demand is seen rising to 100 million barrels per day (bpd) by the end-2021 or in the first quarter of 2022, with the world consuming 99.7 million bpd of oil in 2019, according to the International Energy Agency (IEA).