(Bloomberg) — Oil rose at the start of weekly trading on signs the crude oil market is tightening amid a global energy crisis.
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West Texas Intermediate hit $75 a barrel after a string of five weekly gains, while Brent hit its highest level since October 2018. Stocks dwindled, while U.S. stocks nearly hit a three-year low. At the same time, a rally in natural gas appears to be boosting oil demand as users switch fuels.
Oil is up more than 80% in the past year as global demand recovers from the disruption caused by the pandemic. On the supply side, the Organization of Petroleum Exporting Countries and its allies, including Russia, have only slowly eased production restrictions, allowing markets to tighten. In addition, the extreme weather in the US has hampered local production.
Rough “continues to be supported by wider concerns about tight energy markets,” said Warren Patterson, head of raw materials strategy at ING Groep NV. “Demand appears to be stronger than expected in the near term.”
On the brink of the fourth quarter and the onset of winter in the northern hemisphere, a large number of market observers have noted further price increases. Among them, Goldman Sachs Group Inc. that the market deficit was larger than expected, and raised Brent’s year-end forecast by $10 to $90 a barrel.
Citigroup Inc. said it remained “downright bullish” for both crude oil and gas, according to a commodities outlook. On Monday, US natural gas futures rose for a third day as inventory levels remained low ahead of the heating season.
OPEC+ is expected to meet on October 4 to review its output policy, after maintaining a supply increase of 400,000 per day for the past few months. In anticipation of this, OPEC itself will publish the group’s annual World Oil Outlook on Tuesday.
“If prices continue to rise between now and the meeting, I’m not ruling out the potential for even more aggressive easing,” Patterson said.
Time spreads in major markets have widened, indicating that traders are more positive. Brent’s fast spread was 90 cents a barrel in backwardation, a bullish pattern with near-dated prices above those further out. The gap between the two closest December contracts has widened to over $7 a barrel.
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