Oil futures: Prices tick higher after US data, Brent above $86/b

26 Oct 2021

Quantum Commodity Intelligence – Brent climbed late afternoon in Europe Tuesday, tracking a recovery in the dollar index amid upbeat US economic data, and buoyed by warnings from the fund manager BlackRock that oil could hit $100/b.

Front-month December ICE Brent futures were trading at $86.32/barrel (1530 GMT), compared to Monday’s settle of $85.99/b.

At the same time December NYMEX WTI was trading $84.40/b, versus Monday’s settle of $83.76/b.

Against expectations, US consumer confidence rose in October for the first time in four months, the Conference Board announced, with the gauge rising to 113.8 points from 109.8 in September.

Sales of new homes in the US also surged to a six-month high of 800,000 in September, up from 702,000 homes in August.

BlackRock, the fund management giant, has warned that there is a “high probability” of oil hitting $100 a barrel, at a conference in Saudi Arabia, the Guardian reported.

Prices broadly started the week on a stronger note, moving up to fresh multi-year highs Monday after OPEC officials continued to indicate there will be no change to the 400,000 bpd monthly increments in production, although prices eased off from the highs later in the session on further speculation over Iran talks.

Last week Saudi Arabia's Minister of Energy, Prince Abdulaziz bin Salman, said that any extra oil from the OPEC+ producer group would do little to bring down winter energy prices. 

Russia's deputy Prime Minister Alexander Novak was the latest senior official to dampen calls for a larger increase in OPEC+ output, telling reporters Monday the demand outlook is still uncertain. 

Additionally, the impact of high oil prices on global economic growth and potential demand destruction were cited as bearish factors for Monday's price retreat.

However, in its latest bulletin, Goldman Sachs sees only minimal demand impact from higher prices: “Our macro modeling suggests a 10% rise in oil prices weakens demand by 200 kb/d. As such, we would need prices to rise to $110 /b to stifle demand enough to balance the market deficit we currently see in Q1 2022,” said the bank, adding it expects OPEC+ to continue on the current path of 400,000 bpd per month increases in quotas.

US inventory data from the API and EIA this week will be keenly watched, particularly with a further drop in Cushing stocks likely to bolster WTI prices.

Meanwhile, benchmark 92 RON gasoline surged past $100/b in Singapore, lifting the premium over Brent to around $18/b, the highest since 2017.