Oil price at three-year high means new pressures for household bills

Forecasts for higher oil costs will be closely watched around the world as central banks monitor rising inflation.

The price of Brent crude has posted three straight weeks of gains. File Picture.

Oil prices rose for a fifth straight day with the price of Brent crude oil at its highest since October 2018 and heading for $80 a barrel amid supply concerns as demand picks up in parts of the world with the easing of pandemic restrictions.

Brent crude rose $1.43 or 1.8% at $79.52 a barrel, having posted three straight weeks of gains. The equivalent US contract for crude oil added $1.44, or 2%, to $75.42, near its highest since July, after rising for a fifth straight week last week.

Goldman Sachs raised by $10 its forecast for Brent crude at the end of this year to $90 per barrel, as faster fuel demand recovery from the outbreak of the Delta variant of the coronavirus and Hurricane Ida's hit to US production led to tight global supplies.

While we have long held a bullish oil view, the current global supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below-consensus forecasts," Goldman said.

The forecasts for higher oil costs will be closely watched around the world as central banks monitor inflation after the pandemic. 

Consumer prices in Ireland have been rising in recent months, to reach an annual rate of 2.8% in August, as energy costs push household costs higher.                

Caught short by the demand rebound, members of the Organisation of the Petroleum Exporting Countries and their allies, known as Opec+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.

"Price support came courtesy of US supply tightness as disruptions in the Gulf of Mexico spurred inventory draws," said Stephen Brennock of oil broker PVM.

The European crude benchmark was also buoyed by gains across the broader energy complex, he added. 

Surging natural gas prices fuelled rumours that it could boost demand for alternative fuels, including oil," said Mr Brennock. 

Goldman Sachs analysts including Damien Courvalin wrote in a note to clients: “Observable inventory draws are the largest on record.

“This deficit will not be reversed in coming months, in our view, as its scale will overwhelm both the willingness and ability of Opec+ to ramp up.” 

Reuters, Irish Examiner, Bloomberg