Brent crude prices surpassed $80 per barrel today, Tuesday, amid indications that demand for oil is outpacing supply, leading to a depletion of inventories in the wake of a global energy crisis. The benchmark crude rose for the sixth consecutive day, reaching its highest level since October 2018, while West Texas Intermediate extended its gains, as global supplies tighten due to a rapid recovery in fuel demand following the Delta variant outbreak and Hurricane Ida damaging U.S. production.
The recent surge in oil prices comes amidst a wave of forecasts for rising prices from various banks and traders, alongside further gains in natural gas prices, and speculation that the energy sector is not investing sufficiently in fossil fuels to maintain current supply levels.
**Prices**
- Brent crude for November delivery rose 0.8% to $80.19 per barrel on the ICE, with an earlier high of $80.35.
- West Texas Intermediate for November delivery increased by 0.9% to $76.10 per barrel on the New York Mercantile Exchange.
**Upward Trend**
John Driscoll, chief strategist at JTD Energy Services Pte, told Bloomberg, "It seems that the oil price increase still has some drivers, the fundamentals remain largely compelling, and demand is recovering. I don’t see any evidence yet that the price rally has peaked."
Members of OPEC+ are struggling to boost production as investment shortages or delayed maintenance work due to the pandemic continue, while producers and traders at an energy conference stated that global oil demand is expected to reach pre-pandemic levels by early next year as the economy recovers. However, refining capacity surplus may pressure the outlook.
Greg Hill, CEO of Hess Corporation, told Reuters that global demand is expected to rise to 100 million barrels per day by the end of 2021 or in the first quarter of 2022. Global oil consumption was 99.7 million barrels per day in 2019 according to the International Energy Agency, before the COVID-19 pandemic damaged economic activities and fuel demand.
**OPEC Report**
While global demand has increased, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have cautiously eased supply restrictions. OPEC is set to release its World Oil Outlook report later today, which will detail the group's views on market fundamentals.
Vivek Dhar, an analyst at the Commonwealth Bank of Australia, noted in a memo that crude oil demand could rise by 500,000 barrels per day as high gas prices drive a shift towards oil, adding that this will tighten the markets further, especially as OPEC+ adds supplies cautiously.
**Goldman Sachs Forecast: Oil to Reach $90 if Winter is Colder than Usual**
Goldman Sachs raised its Brent crude price forecast for the end of the year by $10 to $90 per barrel, noting in a memo earlier this week that inventory drawdowns are "the largest ever" and that OPEC+ cannot restore market balance. Global oil consumption is expected to return to pre-pandemic levels in the third quarter of 2022, according to BP, whose CEO Eugene Liang stated in an interview that demand is expected to see average gains of 3.8 million barrels per day year-on-year.
