Crude Oil Prices Hit 7-Year High on Tight Supplies
October 26, 2021
Energy prices traded higher yesterday with crude oil hitting the highest level in seven years, on the back of tight global supplies amid rising demand as economies recover from the pandemic across the globe. RBOB and ULSD closed higher and WTI crude oil closed flat after some profit-taking. The overall sentiment is still supportive. Goldman Sachs who said their forecast for $90 by year-end may be eclipsed also said that the current natural gas to oil fuel switching is adding at least 1,000,00 BPD of more oil demand. Goldman Sachs also said that “we would need prices to rise to $110 per barrel to stifle demand enough to balance the market deficit we currently see in 1Q 2022 given our expectation that OPEC+ continues on the current path of 400,000 BPD per month increases in quotas.”
OPEC+ could be a wild card and any increase in the output above the plan could sell the market off. But OPEC doesn’t appear to be willing to change as they have been apprehensive to add more barrels because of COVID-19. I think they also are not happy with the responses they have gotten from the Biden administration.
Russia’s Deputy Prime Minister, Alexander Novak, expects OPEC+ to increase its output by 400,000 BPD at the November 4th meeting, as previously agreed.
A change in the US National Weather Service medium forecast now calling for below normal temperatures in most of the eastern half of the US for the first week of November put upward pressure on natural gas prices.
Hedge funds continue to increase length in both Brent and WTI crude oil after closing out shorts.