By Adedapo Adesanya
Brent crude soared close to $80 per barrel on Monday, September 27 as investors worried about tighter supplies because of rising demand in parts of the world.
During the session, the price of the commodity rose to $79.29 per barrel, gaining $1.20 or 1.54 per cent while the United States West Texas Intermediate (WTI) gained $1.29 or 1.74 per cent to trade at $75.27 per barrel.
This new height meant Brent has now posted three straight weeks of gains while WTI hit its highest since July, marking a fifth straight week of gain as oil demand is recovering from the Delta variant faster than expected, but supply is not catching up fast enough.
Due to robust demand recovery and weaker supply response from the Organisation of the Petroleum Exporters Countries and allies (OPEC+) and non-OPEC+ producers, some of which, like the US, were hit by supply disruptions following 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.
The market also gained as Goldman Sachs said that the deficit in the oil market is now higher than previously expected.
The investment bank raised its end-2021 oil price forecast to $90 a barrel Brent from $80 per barrel expected earlier on Sunday.
“While we have long held a bullish oil view, the current global oil supply-demand deficit is larger than we expected,” Goldman Sachs strategists wrote.
The firm said the recovery in worldwide demand from the Delta variant has been even faster than its above-consensus forecast and global supply is short of its below-consensus forecasts.
In other words, high oil prices could get even higher. That suggests fuel prices may remain elevated across the world.
Goldman, however, flagged a potential new virus variant, which could weigh on demand and an aggressively faster ramp-up in OPEC+ production that may soften its projected deficit, as key risks to its bullish outlook.
For 2022, the bank lowered its average forecasts for the second and fourth quarter to $80 per barrel from $85 per barrel as it factored in the possibility of an Iran-US nuclear deal by next April.
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.
Dipo Olowookere