OIL PRICES RALLY CONTINUES

OIL PRICES gained for a fifth consecutive day yesterday, with Brent at its highest since October 2018 and heading for $80 (about R1 193) a barrel, as investors fretted about tighter supplies because of rising demand in parts of the world.

Brent crude price was up $1.38, or 1.8 percent, to $79.47 a barrel by 5.10pm, having posted three weeks of gains in a row. US crude futures rose $1.35, or 1.8 percent, to $75.33 a barrel, its highest since July, after rising for a fifth straight week.

Goldman Sachs raised by $10 its year-end forecast for Brent crude to $90 a barrel. Global supplies have tightened due to the fast recovery of fuel demand from the outbreak of the Delta variant of the coronavirus and Hurricane Ida’s hit to US production.

“While we have long held a bullish oil view, the current global supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts,” Goldman said.

Caught short by the demand rebound, members of the Organisation of the Petroleum Exporting Countries and their allies, known as Opec+, have had difficulty raising output as underinvestment or maintenance delays persist from the pandemic.

“The rise of oil prices is continuing beyond what even most bullish traders would dream just months ago, and Brent hurtling towards the threshold of $80 per barrel is reflective of the extraordinarily tight crude market,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

“US supply constraints will continue to provide upside to oil prices, as Ida-related outages will still affect US supply in the first quarter of 2022.”

Global oil demand is expected to reach pre-pandemic levels by early next year as the global economy recovers.