Meanwhile, peak demand for crude is predicted yet again: File Image/Pixabay
Oil on Monday closed above $70 per barrel for the first time in almost six weeks, with traders eyeing the possible destruction caused by another heavy storm expected to bring flooding rains to Houston, as well as parts of Louisiana still recovering from Hurricane Ida.
Brent rose 48 cents, or 0.7 percent, to $73.40 per barrel, while West Texas Intermediate added 49 cents, or 0.7 percent, to $70.21 per barrel.
Trading was also presumably affected by the Organization of the Petroleum Exporting Countries, which said a full demand recovery exceeding pre-pandemic levels would not be achieved until next years thanks to the prevalence of the Delta variant.
As vaccination rates rise......economic activities and mobility will firmly return to pre-COVID-19 levels
OPEC on Monday said it expects oil demand to average 99.70 million barrels per day (bpd) in the fourth quarter of 2021, down 110,000 bpd from last month's forecast: "The increased risk of COVID-19 cases primarily fuelled by the Delta variant is clouding oil demand prospects going into the final quarter of the year; as a result, second-half 2021 oil demand has been adjusted slightly lower, partially delaying the oil demand recovery into first-half 2022."
However, OPEC maintained its overall confidence in demand by adding that globally demand in the whole of 2021 would rise by 5.96 million bpd or 6.6 percent, virtually unchanged from last month; also, the growth forecast for 2022 was adjusted to 4.15 million bpd, compared to 3.28 million bpd in last month's report: "As vaccination rates rise, the COVID-19 pandemic is expected to be better managed and economic activities and mobility will firmly return to pre-COVID-19 levels."
Stephen Brennock, an analyst at brokerage PVM Oil Associates, remarked, "The broader global oil-demand picture is showing signs of normalizing; as OPEC+ is firmly in control of supply, and maintaining its cautious stance, the crude market should continue to tighten further in the year-end period."
But as far as Goldman Sachs is concerned, this poses certain challenges: Jeff Currie, head of commodities research, for Goldman, told Bloomberg television that rising demand, production deficits and depleted inventories are leaving oil markets "extremely exposed" to supply disruptions, and that "The potential for oil prices to explode to the upside is increasing, particularly if you don't get Iran."
Francisco Blanch, head of global commodities and derivatives research at Bank of America Securities, went so far as to resurrect the familiar prediction that oil prices could reach $100 per barrel if we experience a very cold winter: he also told Bloomberg television that supply constraints and low inventories are "a perfect cocktails for commodities to keep breaking higher."
Meanwhile, a familiar long term prediction about oil was raised on Monday by IHS Markit, which stated that global demand for fossil fuels could peak as early as in 2032 as the energy transition gathers pace; it added that global refining capacity should shrink by more than 3 million bpd through 2050.