In this Sept 27, 2021 photo, propane delivery trucks at a Suburban Propane Partners location in Jeffersonville, Indiana, US. (LUKE SHARRETT / BLOOMBERG)
Crude in London surged toward $85 a barrel as the global power crunch boosts demand for oil ahead of winter.
Brent futures rose as much as 2.7 percent to the highest level since October 2018. Prices of coal and natural gas have surged in Europe and Asia with stockpiles running low before the Northern Hemisphere winter, prompting some switching to oil products such as diesel and fuel oil.
There’s a possibility that signs of slowing global growth, partly because of soaring energy prices, will ease some of the demand pressure on crude
It is quickly tightening the market as the Organization of Petroleum Exporting Countries and its allies are sticking with their plan to only gradually roll back production cuts. The price structure is flashing bullishness, with the difference between New York crude’s front two contracts surging to the widest in more than two years, indicating shrinking stocks in the US storage hub of Cushing.
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Global benchmark Brent has risen about 20 percent 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 Citigroup estimates it could reach about 1 million a day in a bullish case.
Citi raised its Brent price estimate for this quarter to $85 a barrel, potentially increasing to as high as $90 at times, on “higher demand, lost supply, gas-to-oil switching and price contagion this winter,” according to a report.
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.
Still, there’s a possibility that signs of slowing global growth – partly because of soaring energy prices – will ease some of the demand pressure on crude. Goldman Sachs Group Inc. cut its forecasts for US expansion this year and next, blaming a delayed recovery in consumer spending. An energy crisis in India may also lead to a slowdown in Asia.
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