Oil surged past $80 a barrel as the global power crunch rattled a market in which OPEC+ has only been restoring output at a modest pace.
West Texas Intermediate futures climbed around 2% after topping the psychological price threshold on Friday for the first time since November 2014. The prices of fuels such as coal and natural gas are soaring in Europe and Asia as stockpiles run low ahead of the Northern Hemisphere winter, prompting a switch to oil products such as diesel and kerosene.
The American crude benchmark has risen almost 30% since mid-August as the energy crisis has intensified. Saudi Aramco estimates the gas shortage has already increased oil demand by around 500,000 barrels a day, while Goldman Sachs Group Inc. sees consumption climbing even higher. Concerns were compounded further after the U.S. Energy Department said it had no plans “at this time” to tap the nation’s oil reserves.
A decision last week by the Organization of Petroleum Exporting Countries and its allies to stick to a plan of returning just 400,000 barrels a day to the market in November has added more upward price pressure as many analysts had anticipated the group would pump more. WTI’s prompt timespread is now 71 cents a barrel in backwardation, a bullish structure where near-dated prices are higher than those further out, from 29 cents a week ago.
“OPEC’s decision to hold back from a bigger than scheduled increase in output is likely to see the market tighten further in the fourth quarter,” said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. The “market remains well bid as demand continues to grow,” he said.
West Texas Intermediate for November delivery rose 1.9% to $80.88 a barrel on the New York Mercantile Exchange at 7:05 a.m. in London after climbing 1.3% on Friday.
Front-month prices rose 4.6% last week.
Brent for December settlement climbed 1.6% to $83.71 a barrel on the ICE Futures Europe exchange.
There’s a possibility that signs of slowing global growth will ease some of the demand pressure on crude, however. Goldman cut its forecasts for U.S. expansion this year and next, blaming a delayed recovery in consumer spending. The bank said in a note that it now sees growth of 4% in 2022, down from a previous estimate of 4.4%. The energy crises in China and India may also lead to a slowdown in Asia.
Iran, meanwhile, said over the weekend, that it plans to offer oil and gas condensate to “any investor” in exchange for either goods or capital investment in the Islamic Republic’s sanctions-hit energy sector. That comes amid stalled discussions to get an international deal on its nuclear program, which would allow it to start exporting oil officially again. The coming weeks will be decisive for Iran’s nuclear program, said German Chancellor Angela Merkel, urging Tehran to come back to the negotiating table.
Other oil-market news
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The underwater pipeline that spilled as many as 3,000 barrels of oil off California’s coast may have been dragged by a ship anchor months or even a year ago.
Gazprom PJSC increased its 2021 price guidance for natural gas exports, while signaling caution on volumes it could ship, as Europe’s energy crisis worsens.