Oil prices hit three-year high due to forecast supply shortfall

Crude oil storage tanks are seen in an aerial photograph at the Cushing Oil Hub in Cushing, Oklahoma, USA, April 21, 2020. REUTERS / Drone Base / File Photo

  • Brent expected to rise for sixth consecutive week
  • Brent at the highest price since October 2018
  • WTI on track to post 8th consecutive weekly gain

Oct. 15 (Reuters) – Oil prices jumped to a three-year high above $ 85 a barrel on Friday, boosted by forecasts of a supply deficit in the coming months as easing travel restrictions linked to coronaviruses are boosting demand.

Brent crude futures were up 70 cents, or 0.9%, to $ 84.70 a barrel at 1:28 p.m. EDT (5:28 p.m. GMT). First-month prices, which hit their highest level since October 2018 at $ 85.10, were heading for a 3% weekly rise, which would be their sixth consecutive weekly gain.

US West Texas Intermediate (WTI) crude futures rose 80 cents, or 1.0%, to $ 82.11 a barrel. The contract is heading for a 3.5% gain on the week, putting it on track for an eighth consecutive weekly rise.

Demand has picked up with the recovery from the COVID-19 pandemic, with renewed momentum from power producers shifting away from expensive gas and coal in favor of fuel oil and diesel.

The White House has said it will lift COVID-19 travel restrictions for fully vaccinated foreign nationals starting November 8, which is expected to boost demand for jet fuel. Read more

Meanwhile, a sharp drop in oil stocks in the United States and member countries of the Organization for Economic Co-operation and Development is expected to keep global supply under pressure.

“It will take a trio of events to derail this rise in oil prices: OPEC + unexpectedly increases production, hot weather hits the northern hemisphere and if the Biden administration exploits strategic oil reserves,” said Edward Moya, senior market analyst at OANDA.

The International Energy Agency said Thursday that the energy crisis is expected to increase demand for oil by 500,000 barrels per day (bpd).

This would lead to a supply shortfall of around 700,000 bpd until the end of this year, until the Organization of Petroleum Countries and its allies, together called OPEC +, add more supply, as expected in January. Read more

Additional reporting by Shadia Nasralla in London, Sonali Paul in Melbourne and Florence Tan in Singapore Editing by Mark Potter, Louise Heavens, David Gregorio and Paul Simao

Our Standards: Thomson Reuters Trust Principles.

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