Oil prices rose early on Friday, with WTI Crude set for its eighth consecutive weekly gain for the longest weekly winning streak since 2015 and Brent briefly topping $85 a barrel as energy markets continue to tighten ahead of the winter.
As of 8:46 a.m. EDT, WTI Crude prices were up 0.68% at $81.88. Brent Crude, the international benchmark, traded at $84.81, up 0.94%, after having briefly hit $85.09 earlier in the day.
The rally in energy commodities, the switch from gas to oil amid record-high natural gas prices, and the tight control over supply from the OPEC+ group continue to push oil prices higher.
Early on Friday, WTI Crude was poised for its best consecutive weekly performance since 2015, according to Bloomberg estimates.
The oil market received a major boost on Thursday when the International Energy Agency (IEA) said in its monthly report that the energy crisis had spurred a switch to oil products from natural gas. This, the IEA says, could raise global oil demand by 500,000 barrels per day (bpd) compared with “normal conditions,” or a market in which energy and power prices are not setting record highs.
Due to expectations of higher oil demand from the gas-to-oil switch, the IEA raised its demand forecast for both 2021 and 2022. This year, global oil demand is now expected to grow by 5.5 million bpd from 2020, the agency said, revising up its growth forecast by 170,000 bpd from last month. Next year, demand will rise by another 3.3 million bpd from 2021. This is an upward revision by 210,000 bpd compared to last month’s projection. In 2022, global oil demand is expected to reach 99.6 million bpd, “slightly above pre-Covid levels,” the IEA said.
U.S. data from Thursday showing a slump in stocks at the Cushing hub also supported prices on Friday, Vanda Insights said.
OPEC+ also gave fresh impetus to oil bulls after the Saudi Energy Minister, Prince Abdulaziz bin Salman, basically ruled out the option that the alliance would respond to the oil price rally by adding more supply than planned, when an oversupply is expected on the market next year.
“We should look way beyond the tip of our noses. Because if you do, and take ’22 into account, you will end up by end of ’22 with a huge amount of overstocks,” he said on Thursday.
By Tsvetana Paraskova for Oilprice.com
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These bullish factors are pushing Brent crude oil price to $85 a barrel with the possibility of even touching $90 before the end of the year.
The global oil demand at 100 million barrels a day (mbd) is already back to 2019 level and could even exceed it before the end of the year.
OPEC+’s rejection of calls to raise its production beyond the 400,000 b/d already agreed upon for November contributed to the price surge. But OPEC+ wasn’t doing it to push oil prices higher but to pre-empt an oversupply next year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London