Oil Nears $80 As Global Energy Shortage Becomes Reality For Traders

by Ship & Bunker News Team
Monday September 27, 2021

Next stop, $80: that was the continued upward trajectory of crude prices on Monday, the fifth straight day of gains for the commodity, as rising demand in many parts of the world again defied common assumptions about a Covid world.

Shortly after it was learned that India's oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, Brent rose $1.14 to $79.23 per barrel, and West Texas Intermediate climbed $1.11 to $75.09, its highest level since July.

India's importing activities were said to be the outcome of refiners stocking up in anticipation of higher demand.

ANZ analysts said in a note, "Supply tightness continues to draw on inventories across all regions."

Ironically, growing signs of an energy shortage "have not been enough to encourage significant new petroleum buying from portfolio investors," according to John Kemp, commodities analyst for Reuters, noting that hedge funds and other money managers purchased the equivalent of just 12 million barrels in the six most important petroleum futures and options contracts in the week to September 21.

However, Kemp added that "positions are not especially stretched at this point; there is scope for more buying and only a moderate risk of an abrupt reversal in the price trend based on positioning alone."

Ben Luckock, co-head of oil trading for Trafigura Group, on Monday told media that the market is mis-pricing forward oil contracts for the next couple of years because traders haven't yet woken up to the fact the supply-demand balance will remain tight for some time.

Brent for December 2022 delivery is changing hands at around $70 per barrel, and Luckock said he wouldn't be surprised if the benchmark  has risen to $100 by then: "I struggle to see anything but higher prices going forward in the next two years."

Of course, it wouldn't be a normal crude trading day without someone predicting oil's ultimate downfall, and on Monday that forecast was provided by TotalEnergies, which in a presentation stated that "Oil demand plateaus before 2030, with a strong decline thereafter, reaching 64 million barrels per day (bpd) in 'Momentum' and 40 million bpd in 'Rupture' in 2050."

TotalEnergies added that the decline would occur as other forms of energy such as wind and solar become more popular.