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Oil Holds Gains as China Eases Curbs, Goldman Boosts Forecasts


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(Bloomberg) Oil held on to recent gains on expectations that Chinese demand will climb in the coming months as virus restrictions are eased. Goldman Sachs Group Inc. also boosted its already bullish market outlook.West Texas Intermediate futures traded near $119 a barrel, advancing for the fourth session in five. Beijing inched closer to zero Covid cases on Monday as the capital rolled back strict virus curbs. Goldman boosted its quarterly price estimates this year and into 2023, saying that oil needed to rally further to achieve the demand destruction required for market re-balancing. Morgan Stanley said it sees upside to its bull case estimate of $150 in the third quarter.

Oil hit a three-month high on Monday as demand is rebounding from the pandemic and a significant tightening of the market after Russia’s invasion of Ukraine. The Bloomberg Spot Commodity Index began the week by rising to a record, mostly driven by natural gas and wheat due to renewed supply fears.

Oil has rallied this year on strong demand, tight market

“With supply being this tight, prices will likely need to go higher in order to kill demand and balance the market,” said Ole Hansen head of commodities research at Saxo Bank A/S.

The war in Ukraine has fanned inflation, boosting the price of everything from food to fuels. The US is grappling with record pump prices at the start of its summer driving season, typically a period of peak demand, while developing nations are suffering from the rising cost of energy.

GLJ
GLJ

Prices

  • WTI for July delivery rose 0.2% to $118.71 a barrel at 9:56 a.m. in London.
  • Brent for August settlement gained 0.1% to $119.57 a barrel.

The oil market will likely be in a deficit of 500,000 barrels a day in the second half of the year, Morgan Stanley analysts Martijn Rats and Amy Sergeant wrote in a report. Goldman wrote in a note that the market remains in a structural deficit and was even tighter than expected in April. The bank increased its third quarter price forecast for global benchmark Brent to $140 a barrel and its estimate for WTI to $137 for the same period.



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