(Bloomberg) — Oil pushed higher at the week’s open as investors weighed prospects for rising demand as the omicron virus wave fades in key economies.
Global benchmark Brent rose toward $89 a barrel in early Asian trading after a run of five weekly gains, the best streak since October. President Joe Biden’s chief medical adviser, Anthony Fauci, expressed optimism at the weekend that the surge in the new variant will soon peak. That could underpin improved consumption as more workers return to offices and people travel more.
Crude has enjoyed a robust start to the new year, with prices soaring to the highest since 2014 last week, as demand picked up, stockpiles fell, and top Wall Street banks including Goldman Sachs Group Inc. issued bullish oil forecasts. At the same time, investors are weighing the possibility that Russia may invade Ukraine, as well as the outlook for tighter U.S. monetary policy.
The emergence of the fast-spreading omicron variant late last year initially spurred concern that the pandemic may be entering a new phase that would once again imperil oil demand. But the variant delivered a lighter-than-expected blow to crude consumption, enabling prices to bounce back.
Crude markets are in backwardation, a bullish pattern marked by near-term prices trading above longer-dated ones. Brent’s prompt timespread — the gap between its two nearest contracts — is now at 79 cents a barrel in backwardation, almost double the level at the end of December.
See also: Dude, Where’s My Oil? (And Why Is It So Expensive?): Julian Lee
As oil has rallied in 2022, traders have been raising bets on further gains. Money managers have increased their bullish Brent and WTI oil wagers to the highest level in ten weeks, according to weekly ICE Futures Europe and CFTC futures and options data on four contracts.
Among banks, Goldman Sachs, a long-time commodity bull, expects that crude will hit $100 by the third quarter, and Morgan Stanley sees the same figure and timeframe. Bank of America has said that Brent crude would rise to $120 a barrel in mid-2022, while Citigroup Inc. remains more cautious.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
