(Bloomberg) – Oil rallied early in the trading week on signs that the crude oil market is tightening amid a global energy crisis.
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West Texas Intermediate hit $ 75 a barrel after five weekly gains, while Brent hit its highest level since October 2018. Inventories are dragging, with US inventories near a three-year low. At the same time, a rally in natural gas appears to be fueling demand for oil as consumers switch fuel.
Oil has surged more than 80% in the past year as global demand rebounds from the disruptions caused by the pandemic. On the supply side, the Organization of Petroleum Exporting Countries and its allies, including Russia, have been slow to loosen production restrictions, allowing markets to tighten. In addition, extreme weather in the US has adversely affected local production.
Crude oil “continues to be fueled by broader concerns about tight energy markets,” said Warren Patterson, head of raw materials strategy at ING Groep NV. “The demand looks like it will be stronger than expected in the short term.”
On the threshold of the fourth quarter and the beginning of winter in the northern hemisphere, numerous market watchers recorded further price gains. Among them, Goldman Sachs Group Inc. said the market deficit was larger than expected and raised its year-end Brent forecast by $ 10 to $ 90 a barrel.
Citigroup Inc. said it remained “downright bullish” on both crude oil and gas according to a commodities outlook. US natural gas futures rose a third day on Monday as inventory levels remained low prior to the heating season.
OPEC + is scheduled to convene on October 4 to review production policies after sticking to a 400,000-a-day supply increase over the past few months. Before that, OPEC itself will publish the group’s annual World Oil Outlook on Tuesday.
“If prices continued to move higher between now and the meeting, I wouldn’t rule out the potential for even more aggressive easing,” Patterson said.
The time spans of the key markets have widened, suggesting traders are more positive. Brent’s prompt spread was 89 cents a barrel of backwardation, a bullish pattern with short-term prices above those further out. The gap between the next two December contracts has widened to more than $ 7 a barrel.
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