Oil prices edge towards new highs on short supply

Analyst says market remains tight which should drive prices up

LONDON:

Oil prices edged towards new multi-year highs on Tuesday, supported by a global supply shortage and strong demand in the United States, the world’s biggest consumer.

Brent crude was flat at $86 a barrel by 1309 GMT. US oil was up $0.2, or 0.7%, to $83.96.

Goldman Sachs said Brent was likely to push above its year-end forecast of $90 a barrel, while Larry Fink, Chief Executive of the world’s largest asset manager BlackRock, said there was a high probability of oil reaching $100.

“The fact that the market remains tight should drive prices up,” said Commerzbank analyst Carsten Fritsch.

While China’s red-hot power and coal markets have cooled somewhat after government intervention, energy prices remain elevated worldwide as temperatures fall with the onset of northern winter.

“Forecasts for a colder November have energy traders bracing for a very tight market that will be met (with) unprecedented demand this winter,” Oanda senior market analyst Edward Moya said in a note.

“This oil market will remain tight and that should mean a headline or two away from $90 oil.”

Gasoline and distillate consumption in the United States is back in line with five-year averages after more than a year of depressed demand, and the market will be closely watching US inventory levels.

Crude oil stockpiles are forecast to have risen by 1.7 million barrels last week while gasoline and distillate inventories were expected to have fallen, according to a Reuters’ poll of analysts.

Avtar Sandu, Senior Manager Commodities at Phillip Futures in Singapore, said traders were also awaiting clarity on the outcome of international talks on reviving Iran’s 2015 nuclear agreement, after the United States said efforts were at “crucial phase” that could re-open the way for exports of Iranian crude.