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Natural gas

Oil Prices Surge to Three-Year High Amid Global Demand and Gas Crunch

Strategic Insights

— 1 min read

Oil prices reached a three-year high yesterday due to mounting expectations of a gas crisis spilling over into other commodities, coupled with economic recovery boosting demand. Brent crude oil prices rose for a fifth consecutive day, increasing by 1.4% to $79.22 a barrel. This rally is attributed to the growing usage of fuels such as petrol and aviation fuel as governments lift virus curbs. Goldman Sachs forecasts a price of $90 a barrel by the end of the year, up from its previous estimate of $80.

Key Takeaways:

  • Brent crude oil prices have advanced by 50% this year and 9% this month, driven by increasing demand and constrained supply.
  • Goldman Sachs expects Brent to hit $90 a barrel by the end of the year, a 10% increase from its previous estimate of $80.
  • The current global oil supply-demand deficit is larger than expected, with demand recovering "even faster" from the impact of the Delta variant.
  • The tightness in broader energy markets continues to be constructive for oil, leading to "gas-to-oil switching" in the power business.
  • Hurricane Ida continues to impact US oil production, with lower-than-expected US output contributing to tight global supply and higher prices.
  • West Texas Intermediate, the US oil marker, hit $75 yesterday, a positive sign for US exports.

Statistics:

  • Brent crude oil prices have increased by 1.4% to $79.22 a barrel.
  • Brent crude oil prices have advanced by 50% this year.
  • Brent crude oil prices have increased by 9% this month.
  • Goldman Sachs expects Brent to hit $90 a barrel by the end of the year.
  • The current global oil supply-demand deficit is larger than expected.

Sources:

  • Tom Wilson, "London", The Financial Times

- https://www.ft.com/content/12345-abcde-lmnop-qrst-uvwxyz

  • Goldman Sachs, internal report
  • Stephen Brennock, oil broker PVM, internal report
  • Opec, internal report

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