Oil prices surge and could break $100/Bbl

Oil prices surged Tuesday, near multi year highs as the market remains tight given increasing fuel demand due to cold weather, particularly in the U.S., and only gradual increases in supply.

U.S. crude futures were up 0.5% at $84.16 a barrel, while Brent futures were up 0.4% at $85.50 a barrel. U.S. Gasoline futures were up 0.9% at $2.4655 a gallon.

Oil has soared of late as demand has increased with the ending of Covid-19 restrictions but increases in supply are struggling to keep up. The U.S. WTI contract climbed to its highest level since October 2014 and the Brent contract since October 2018.

Further gains still look possible, as there is a high probability of oil reaching $100 a barrel. This largely matched the views of influential U.S. investment bank Goldman Sachs, which stated over the weekend that the Brent crude oil price was likely to climb above its year end forecast of $90 per barrel.

OPEC and its allies are due to meet next week to discuss their production levels. The market is not expecting the group to agree to an increase in supply of more than the 400,000 barrels previously agreed, chiefly after comments from Saudi Arabia’s energy minister over the weekend that producers should remain cautious.

The American Petroleum Institute is due to report estimates for U.S. oil inventories later in the U. S. session. Crude oil stockpiles are expected to rise by 1.7 million barrels last week but gasoline and distillate inventories are expected to fall.