Oil prices rose early on Monday, extending Friday’s gains, with Brent nearing $80 and WTI Crude exceeding $75 per barrel as global oil and energy markets continue to tighten.
As of 7:59 a.m. EDT on Monday, Brent Crude was up by 1.40% at $79.24, and the U.S. benchmark, WTI Crude, traded at $75.02, up by 1.41% on the day, as supply tightens and global energy prices rally ahead of the winter season in the northern hemisphere.
Oil demand is recovering from the Delta variant faster than expected, but supply is not catching up fast enough, analysts say.
Goldman Sachs, for example, said that the deficit in the oil market is now higher than previously expected. The investment bank raised on Sunday its end-2021 oil price forecast to $90 a barrel Brent from $80 per barrel expected earlier, due to robust demand recovery and weaker supply response from OPEC+ and non-OPEC+ producers, some of which, like the U.S., were hit by supply disruptions in the wake of Hurricane Ida.
The hurricane has shut in more than 30 million barrels of oil since it made landfall at the end of August, prompting inventory draws in the United States that have underpinned oil prices in recent days.
In addition, surging natural gas prices globally amid decade-low inventory levels in Europe and strong Asian LNG demand ahead of the winter are forcing utilities to run more oil- and coal-fired electricity generation. Increased use of oil in the winter is set to further boost demand for crude alongside the faster-than-expected recovery from the Delta-led slump in consumption in some areas in Asia in July and August.
Oil continues to trade higher “as the global energy crunch that started in the gas, coal and power market has spread to crude oil as users around the world start to switch fuels,” Saxo Bank’s strategy team said early on Monday.
“Together with a vaccine-led rise in demand, Hurricane Ida related supply disruptions, and OPEC+ not being able to deliver the promised production increases, these developments are likely to underpin prices into the northern hemisphere winter,” the bank said.
By Tsvetana Paraskova for Oilprice.com
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