Sept 28, 2021: Brent oil topped $80 a barrel amid signs that demand is running ahead of supply, depleting inventories amid a global energy crunch.
The Leading crude benchmark rose for the sixth day in a row since October 2018, while West Texas Intermediate rose. The latest oil development comes amid predictions from banks and traders about higher prices, further gains in natural gas and speculation that the energy industry is not investing enough in fossil fuels to keep supplies at current levels.
Oil has risen this year as the rollout of vaccines to combat pandemics helps meet energy demand, leading to a decline in U.S. inventories. The dramatic increase in natural gas has bet that crude oil will benefit from spill-over demand as consumers look for alternatives. The Trafigura Group, one of the world’s largest commodity trading houses, is among those predicting higher oil prices.
According to JTD energy services pte Chief strategist, John Driscoll, “It looks like the oil rally has still got some legs. Fundamentals are still pretty convincing, demand is recovering, backwardation is increasing. I just don’t see any evidence yet that the rally has topped out.”
While global demand has increased, the Organization of Petroleum Exporting Countries and its allies, including Russia, are cautiously easing supply restrictions. At the end of Tuesday, OPEC will release its World Oil Outlook, outlining the group’s views on the fundamentals of the market.
Commonwealth Bank of Australia analyst Vivek Dhar said in a note that demand for crude oil could rise by 500,000 barrels per day. Dhar said this would further tighten the markets, especially with only a conservative increase in OPEC supply. On Tuesday, US natural gas resumed.
Global oil consumption is expected to return to pre pandemic levels in the third quarter of 2022, according to BP Plc. Demand is expected to see an average gain of 3.8 million barrels a day on-year, President of BP Singapore Eugene Leong said in an interview.
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