Oil and gas industry updates
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Oil prices climbed Monday to their highest level in three years on rising expectations that the natural gas crisis will spill over to other commodities as the global economic recovery stimulates demand.
Brent, the international benchmark, rose for the fifth day in a row, adding 1.4% to $ 79.22 per barrel. The price of Brent is up about 50% this year and 9% this month.
The strong recovery comes as businesses and consumers increase their use of everything from gasoline to airplane fuel, as governments lift social restrictions imposed to slow the spread of the coronavirus.
Goldman Sachs, one of the most influential banks in the commodities markets, said it expects the rally to continue and expects Brent to hit $ 90 a barrel by the end of the year. year, up from a previous estimate of $ 80.
“The current deficit in global oil supply and demand is larger than expected,” he said, adding that demand has recovered “even faster” than expected from the impact. of the variant of the Delta coronavirus, and that the global supply remained limited.
The rise in oil prices comes amid a broader recovery in energy markets, particularly gas, which has reached record prices in recent weeks due to underinvestment in production, strong demand and competition for supply between Europe and China. The impact of the gas crisis has been felt in several sectors and should lead to an increase in oil-fired electricity production in some countries if gas prices remain high.
“Tightening broad energy markets continues to be constructive for oil,” said Warren Patterson, head of raw materials at ING, adding that it would lead to “gas-to-oil switching” in the sector. electricity.
Goldman Sachs added: “Winter demand risks are now on the upside. [regarding] the global gas shortage will increase oil-fired electricity production.
At the same time, the long-term effects of Hurricane Ida continue to be felt in the United States, where part of the production in the Gulf of Mexico remains offline due to damage from the storm. According to Stephen Brennock of oil broker PVM, lower-than-expected US production was contributing to the squeeze in global supply and helping to push up prices.
Although he added that US oil is now relatively cheap compared to the rest of the world – West Texas Intermediate, the US oil marker, hit $ 75 on Monday – in a positive sign for future US exports.
“The dark clouds from Hurricane Ida may not have fully lifted yet, but better days are yet to come for US crude exports,” he said.
Opec, the cartel of oil producers, and its allies have gradually restored supplies they cut back at the start of the pandemic but have resisted pressure, especially from the United States, to increase production more quickly. to cool the prices.
ING’s Patterson said the latest evolution in oil prices would trigger an “interesting Opec + meeting next week,” when the group meets to decide whether to continue restoring production levels of 400,000 barrels per day every day. months, as previously agreed. “If prices continue to rise between now and the meeting, I would not rule out the possibility of even more aggressive easing,” he added.
European energy majors BP, Shell and Total all climbed around 3% on Monday afternoon.