Oil trades near $80 as global power crisis set to boost demand

Oil steadied near the psychological $80-a-barrel mark as a global power crunch rattled the market while OPEC+ output has been slow to ramp up.

West Texas Intermediate futures climbed 0.7 per cent in New York after topping the key price level on Friday for the first time since November 2014. From Asia to Europe, the prices of heating fuels such as coal and natural gas are surging as stockpiles run low ahead of the winter season, prompting a switch to products such as diesel and kerosene.

Crude has gained more than 60 per cent this year as the roll-out of Covid-19 vaccines lifted movement curbs and, subsequently, oil demand. While the Organization of Petroleum Exporting Countries and its allies have pledged to return more withheld supplies to market, the increase is likely to lag rising consumption of transport and heating fuels during the upcoming winter months.

Saudi Aramco estimates the gas crisis has already increased oil demand by around 500,000 barrels a day, while Goldman Sachs Group sees consumption climbing even higher. Concerns further compounded after the US Energy Department said it had no plans “at this time” to tap the nation’s oil reserves.

The coming weeks will be decisive for Iran’s nuclear programme, German Chancellor Angela Merkel said, urging Tehran to come back to the negotiating table as stalled talks with world powers hang in the balance. A swift resolution to the stand-off is unlikely after the last round of talks ended inconclusively in June with no date set for the next one, keeping millions of barrels away from most international buyers.

Meanwhile, economists at Goldman cut their forecasts for US growth this year and next, blaming a delayed recovery in consumer spending. The bank said in a report that it now expects growth of 5.6 per cent on an annual basis in 2021 versus their previous estimate of 5.7 per cent, and 4 per cent next year, down from 4.4 per cent.