West Texas Intermediate topped $75 a barrel after a run of five weekly gains, while Brent reached the highest level since October 2018. Prices are set to continue rallying as supply struggles to catch up with fast-rising demand, according to Trafigura Group’s co-head of oil trading Ben Luckock. His remarks came on the same day that Goldman Sachs Group Inc. said Brent could hit $90 a barrel by year-end as the market is in a bigger deficit than many realize.
Crude is rallying on signs that inventories globally are falling sharply, with demand hotting up ahead of winter and OPEC+ only slowly adding barrels back to the market. As traders eye the prospect of large market deficits, Trafigura said longer-dated oil prices remain cheap at around $70 a barrel. So-called timespreads, which gauge market strength, have rallied sharply in recent weeks in another sign that traders are positive about the outlook.
“Observable inventory draws are the largest on record,” Goldman Sachs analysts including Damien Courvalin wrote in a note to clients. “This deficit will not be reversed in coming months, in our view, as its scale will overwhelm both the willingness and ability of OPEC+ to ramp up.”
OPEC+ is scheduled to meet on Oct. 4. to review output policy after sticking with supply increases of 400,000 a day for recent months. Internal documents from the group have already highlighted the risk of the natural gas crisis ramping up demand.
Citigroup Inc. said it remained “outright bullish” on crude as well as gas, according to a commodities outlook. On Monday, U.S. natural gas futures rose for a third day as inventory levels stayed low ahead of the heating season.