Americas News
Oil Hurls Closer to $100 On Global Outages, Unstoppable Demand
Wednesday’s crude trading followed a familiar pattern of bullish sentiment wiping out omicron fears, this time due to an International Energy Agency report stating that oil is on track to hit pre-pandemic levels amid rapidly falling global stockpiles (down by over 1 billion barrels per day since the peak of May 2020).
West Texas Intermediate closed up 1.8 percent following the release of the IEA report, causing Rebecca Babin, senior energy trader at CIBC Private Wealth Management, to say, “The market has already priced in a tighter market in 2022, and the IEA and other agencies are just catching up to that.”
She added that oil could still extend its rally as “event risks in a tight market can cause outsized moves to the upside.”
Among the many bullish statements made in the IEA report was the remark that “COVID-19 is once again causing record infections. But this time around, the surge is having a more muted impact on oil use.”
Brent settled up 93 cents to $88.44 per barrel (its highest since Oct. 13, 2014), while WTI settled up $1.53 to $86.96 per barrel, its highest since Oct. 9, 2014.
Oil’s remarkable performance in the early days of the New Year have caused analysts to shift from wondering if oil will hit $100 to trying to calculate when the event will happen.
Following the $100 prediction from Goldman Sachs Group Inc. and Energy Aspects, Bloomberg noted that while the surge of U.S. shale output has the potential to restrain the rally, the Organization of the Petroleum Exporting Countries’ (OPEC) ongoing struggle to restore output plus production challenges in other countries “look set to be a major factor pushing oil toward the US$100-a-barrel mark.”
For his part, Julian Lee, commodities analyst for Bloomberg, on Wednesday stated, “The oil market is getting tighter and there may be even less slack in the system than forecasts suggest….demand estimates may be too low, production numbers too high, or some combination of the two.”
Jim Ritterbusch, president of Ritterbusch and Associates, added, "Any way that the numbers are crunched, it appears that global inventory will continue to draw for a few more months with this implied tightening in the balances keeping this bull alive through the rest of this month and most of next."
