Brent could reach $90 per barrel if the weather in the northern hemisphere turns out to be colder than normal this winter, Goldman Sachs’ Jeff Currie said on Wednesday, according to Bloomberg.
This is $10 per barrel more than Goldman’s current forecast.
The call for higher oil prices would come on top of the already too-high natural gas prices, which have sunk some natural gas power providers in Europe.
The natural gas situation in Europe will have a spillover effect on the oil market, with natural gas in short supply and crude oil one of the only viable alternatives as wind and solar power prove insufficient at this time.
On Tuesday, commodity trader Vitol said that weather was the key to stopping the panic that currently exists in the market—with warmer winter weather the only hope for falling prices.
Unfortunately for power consumers and utilities that are already under the gun, but perhaps conveniently for OPEC and the oil industry in general, The Farmers’ Almanac is predicting a frosty flip-flop winter in the United States, with lots of whipsawing, with wintery weather spilling over into the end of March.
But a colder winter in Europe in Asia will have a profound effect on natural gas and oil demand. Earlier this week, Goldman Sachs predicted that a colder winter could lead to 900,000 bpd in additional oil demand.
Meanwhile, oil prices were trading roughly 2% on Wednesday, with WTI trading at $71.93 per barrel, and Brent crude trading at $75.83 per barrel—up $1.47 on the day. The price rise comes as crude oil inventories continue to draw down in the United States.
Dwindling inventories and projections for increased demand could add to today’s bullish sentiment for crude.
ADVERTISEMENT
By Julianne Geiger for Oilprice.com
More Top Reads From Oilprice.com:
- Shell Exits Permian In $9.5 Billion Deal
- The Dangerous Rally In Natural Gas Prices
- Washington's Attack On Oil And Gas May Backfire
Essentially, because we import oil that is priced on a global market, any sort of international incident or supply disruption increases the price we pay for a liter of gasoline or diesel. ... That means the cost of everything from rice to shampoo to farming supplies goes up, and people buy less.
Because of our dependency on imported energy i.e. oil, coal etc. we suffer from increases in oil prices. This high oil price shocks impacts our macroeconomic variables such as growth, inflation, and unemployment.
The decline of our upstream oil and gas sector and in the absence of action being done makes things worst particularly this time we are recovering from the pandemic.
Though the fundamentals of the global oil market are robust enough to give global oil demand and prices a huge upward push, a powerful bullish influence will come from a completely different direction, namely the excessive pressure on the global oil industry to divest of its fossil fuel assets.
Unfortunately, the narrow-mindedness of the advocates of divestment blinds them to the fact that divestment reduces production of fossil fuels not the global demand for them thus creating deficits in the market and skyrocketing prices.
Global consumers are being forced to choose between global transition to renewables and energy security. They will overwhelmingly vote for energy security.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London