Oil edges up to new multi-year highs on short supply By Reuters

© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford

By Scott DiSavino

NEW YORK (Reuters) -Oil prices edged up to fresh multi-year highs on Tuesday, supported by a global supply shortage and strong demand in the United States, the world’s biggest consumer.

futures rose 15 cents, or 0.2%, to $86.14 a barrel by 11:05 a.m. EDT (1505 GMT), while U.S. West Texas Intermediate (WTI) crude rose 42 cents, or 0.5%, to $84.18.

That puts global benchmark Brent on track for its highest close since October 2018 for a second day in a row, and WTI on track for its highest close since October 2014.

U.S. gasoline futures, meanwhile, were on track for their highest close since September 2014 for a second day in a row.

“Despite the initial soft signals in today’s trading, the energy crunch is still nowhere close to subsiding, so we expect prevailing strength in oil prices in November and December as supply lags demand and as OPEC+ stays on the sidelines,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

OPEC+, comprising of the Organization of the Petroleum Exporting Countries and allies like Russia, is currently raising production by 400,000 barrels per day (bpd) each month, but has pushed back against calls to boost output faster in response to the surge in prices.

Goldman Sachs (NYSE:) 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 (NYSE:), said there was a high probability of oil reaching $100.

With oil and gas prices at multi-year highs, U.S. shale producers are poised to deliver the strongest earnings since the onset of the coronavirus pandemic, so long as they did not lock in sales tied to much lower prices.

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 the 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 analysts 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 U.S. inventory levels.

Analysts expect the latest weekly U.S. oil inventory data to show a 1.7 million-barrel build in crude stocks. [EIA/S] [API/S] [ENERGYUSA] [ENERGYAPI]

Data from the American Petroleum Institute, an industry group, is due at 4:30 p.m. EDT on Tuesday and from the U.S. Energy Information Administration on Wednesday.

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.

(Additionl reporting by Aaron Sheldrick in Tokyo and Dmitry Zhdannikov in London; Editing by Marguerita Choy and David Evans)

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