Crude oil rose 1.5% to close at $80.52. The last time oil prices closed above $80 was on October 31, 2014.
High oil prices will only exacerbate inflation, squeeze the budgets of American families and harm the political fate of President Joe Biden.
Matt Smith, chief petroleum analyst for Kpler Americas, said: “This is a case of trying to maintain lighting.” “It’s essentially creating demand that doesn’t normally exist.”
100 dollars in card oil?
Citigroup on Monday raised its forecast for Brent crude oil for the fourth quarter to US$85 per barrel and said that crude oil may sometimes touch US$90. The Wall Street bank cited the “price contagion this winter” and the expectation that power plants will switch from sky-high natural gas prices to oil.
Citi added that a “very cold winter” may cause Europe to “run out of natural gas” in February.
For a long time, oil has been a potential substitute for natural gas—until recently, it had no economic significance. This is because the price of natural gas has been very low for most of the past ten years, so it is not economical to switch to oil.
Bank of America warned that a cold winter could increase oil demand by 500,000 barrels per day, pushing Brent crude oil to $100 per barrel. This in turn will have a greater impact on American drivers, because gasoline prices are priced based on Brent crude oil.
Bank of America strategists wrote in a recent report to clients: “We may be only one storm away from the next macro hurricane.”
China’s coal prices hit a record high
It’s not just high natural gas prices that play a role here.
In this context, the price of gasoline in the United States has been rising all the way, adding to the inflationary pressures that have enveloped the economy.
According to Patrick De Haan, GasBuddy’s head of petroleum analysis, the price of natural gas across the country may reach $3.30.
“Looking forward, I really didn’t see an organized drop in prices,” De Haan said. “The market is starting to feel explosive. The fundamentals continue to exist.”
OPEC is in a dominant position
Although demand is strong, oil supply has not kept pace at all.
U.S. oil production has been slow to rebound from Covid—even if prices soared. Many American oil companies are cautious about the market’s oversupply again, and they are more focused on returning cash to shareholders who have lost money in the past decade.
Although the White House called on OPEC and its allies to substantially increase production, the organization only gradually increased production in early 2020. For now, they seem content to keep oil prices high.
“They have always been the producers of swing music,” Kepler’s Smith said. “But my goodness, they must have power now.”