You need to active Javascript on your
BusinessDay
Nigeria's leading finance and market intelligence news report.

Oil’s price surge goes on as Goldman forecasts $90 a barrel on cold winter

Oil is poised for a fifth weekly gain in a market tightened by a global energy crunch that’s set to increase demand for crude.

Futures in New York held above $73 a barrel, while global benchmark Brent traded above $77 or near its highest settlement since 2018.

Analysts at Goldman Sachs say they expect oil to surge to $90 a barrel if the approaching winter in the northern hemisphere proves colder than normal.

Vitol Group expects global crude demand to climb by an extra half a million barrels a day this winter, with prices likely headed above $80 a barrel, as a gas-led energy crunch drives a rush for other fuels.

Such a rise would be $10 higher than the bank’s current forecast and would be accompanied by a prolonged period of high natural gas prices that already have had disastrous consequences for U.K. power providers.

Read Also: Oil prices climb to $74.14 after drawdown in stocks, positive demand outlook

Crude inventories have shrunk from Europe to the U.S., even as OPEC+ adds more supply, with demand for oil products in power generation expected to climb following a surge in natural gas prices ahead of the northern hemisphere winter.

China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves, said traders with knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.

Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting that prices could climb even further because of the energy crisis.

Global crude consumption could rise by an additional 370,000 barrels a day if natural gas remains elevated for an extended time, according to the Organization of Petroleum Exporting Countries.

“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.

Various underlying oil market gauges are also pointing to a stronger market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive on the market outlook.

At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.

Whatsapp mobile

Get real time updates directly on you device, subscribe now.