West Texas Intermediate closed in on $75 a barrel after a run of five weekly gains, while Brent hit the highest level since October 2018. Inventories have been drawing, with U.S. stockpiles near a three-year low. At the same time, a rally in natural gas looks set to drive demand for oil as users switch fuels.
Oil has surged more than 80% over the past year as worldwide 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 been easing output curbs only slowly, permitting markets to tighten. In addition, extreme weather in the U.S. has crimped local production.
On the threshold of the fourth quarter and onset of the northern hemisphere winter, a host of market watchers have flagged further gains in prices. Among them, Goldman Sachs Group Inc (NYSE:GS). said the markets deficit was larger than expected, and raised its year-end Brent forecast by $10 to $90 a barrel.
Key market timespreads have been widening, suggesting that traders are increasingly positive about the outlook. Brent‘s prompt spread was 85 cents a barrel in backwardation, a bullish pattern with near-dated prices above those further out. That’s up from 61 cents a week ago.
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