Brent Oil Approaches $85 With Energy Crisis Boosting Demand

Brent futures rose as much as 2.7% 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.

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 U.S. storage hub of Cushing. 

Global benchmark Brent has risen about 20% 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.

Sourcce: Bloomberg Business News