Oil Jumps On Massive Crude Drawdown As Goldman Says Prices Could Reach $90 Soon

Meanwhile, India plots to offset the global crude rally: File Image/Pixabay

The worry over demand impact due to Covid and other factors was yet again proven unfounded on Wednesday, with another massive draw in U.S. stockpiles causing investors to boost oil prices by about 1 percent.

According to the American Petroleum Institute, crude stocks fell by 6.1 million barrels for the week ended September 17, a much bigger decline than the 2.4 million barrel drop in crude inventories predicted by analysts.

Gasoline inventories fell by 432,000 barrels and distillate stocks, including jet fuel, fell by 2.7 million barrels.

Accordingly, West Texas Intermediate on Wednesday rose 75 cents, or 1.1 percent, to $71.24 per barrel at 0131 GMT, and Brent climbed 68 cents, or 0.9 percent, to $75.04 per barrel.

Prices were said to be further supported by Nigeria, Angola, and Kazakhstan struggling to help the Organization of the Petroleum Exporting Countries (OPEC) increase output to its targeted levels.

Also, "Market sentiment got additional support from the end of the U.S. ban on foreign travellers," according to a note from ANZ.

As solid as crude prices are compared to a year ago, Jeff Currie, global head of commodities research at Goldman Sachs, said on Wednesday that they could climb far higher: specifically to $90 per barrel if winter in the northern hemisphere is colder than normal.

He remarked, "Supply chains are so severely depleted that the system cannot accommodate any type of disruption."

Meanwhile, Ihsan Abdul Jabbar, oil minister for Iraq, speculated that higher demand for crude would occur as the shortfall of natural gas around the world causes consumers to look for alternative fuels, with demand increasing possibly by 1 million barrels per day (bpd).

However, one negative consequence of escalating oil prices is inflation, and in India higher prices at the pump threaten to complicate the central bank's efforts to keep borrowing costs lower for longer to facilitate that country's economic recovery from the government-imposed Covid lockdowns.

Hence, India's fuel retailers are reportedly planning to increase gasoline and diesel prices after a two-month hiatus, to offset the oil rally.