Oil rallies with IEA seeing gas shortages deepening deficit

Oil in New York surged past $81 a barrel after the International Energy Agency became the latest to say natural gas shortages are boosting demand for crude.

WTI crude futures rose 1.5 per cent to near the highest level since 2014. Record gas prices could add about 500,000 barrels a day of oil use over the next six months, the IEA said. Banks including UBS Group AG and Citigroup this week raised their oil price forecasts because of the gas-to-oil switch.   

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman reiterated the need for Opec and its allies to take a gradual, phased approach to supply hikes. He said the oil market will be balanced by the end of the year, but reiterated the group will face a challenging 2022. 

Crude’s rally in recent months has been underscored by wider gains in energy prices. The IEA’s head of oil markets, Toril Bosoni, said the oil market is likely to remain firm for months, while Bank of America Corp. is talking up the potential of $100 a barrel. 

“Risks for the oil market are clearly skewed to the upside in the coming weeks,” said Warren Patterson, head of commodities strategy at ING Groep NV. “The global balance continues to tighten, while the potential for further gas-to-oil switching suggests an even tighter market.”