Americas News
No End In Sight For Oil Price Gains As Worry Over Energy Crunch Intensifies
Crude prices on Friday were set for an eighth consecutive weekly gain as gas and coal shortage continued to boost demand for the commodity and Brent climbed above $85 per barrel for the first time since 2018.
Demand is also expected to climb in the coming weeks on Washington's announcement that it will open its borders to vaccinated foreign travellers next month.
West Texas Intermediate rose 97 cents to $82.28 per barrel, while Brent settled up 56 cents to $84.86 per barrel.
Edward Moya, senior market analyst at OANDA, said, "It will take a trifecta of events to derail this oil price rally: OPEC+ unexpectedly boosts output, warm weather hits the northern hemisphere, and if the Biden administration taps the strategic petroleum reserves."
Given the concern over a possible energy crunch this winter in the northern hemisphere, many critics wondered why the Organization of the Petroleum Exporting Countries (OPEC) has refused to boost supply by more than the planned 400,000 barrels per day (bpd).
But Bloomberg addressed this issue on Friday, stating that "the steepest oil stock draws are behind us and that, if the producer group keeps adding supply at the same rate in the coming months, global oil inventories will start to swell again next year - and that's even after demand gets a winter boost from fuel switching prompted by high-priced natural gas."
However, in noting that The International Energy Agency, the U.S. Energy Information Administration, and OPEC agreed that the steepest stock draws are over, the news agency pointed out "stark differences in the detailed views of the three agencies" – to the extent that "they cannot even agree on what happened in the past, let alone what will happen in the future."
John Kemp, commodities analyst at Reuters, on Friday said global petroleum inventories have fallen to their lowest seasonal level for seven years and had harsh words for producers: "[They] say they are not trying to raise prices but are worried about a potential future slowdown in consumption growth as a result of coronavirus flare ups.
"But their actions are helping keep inventories below normal and imply they are happy with the rising trend in prices, which is also boosting revenues."
He concluded, "Producers will likely continue to restrict output as long as they can deflect blame for increasing prices onto fears about coronavirus flare-ups, future slowdowns in demand, and pressure from investors worried about the energy transition."
Meanwhile, the IEA believes the energy crunch is expected to boost oil demand by 500,000 bpd: this will result in a supply gap of around 700,000 bpd through the end of 2021, until OPEC adds more supply as planned in January.
