Oil stocks bucked the trend in early trading.Exxon Mobil, Royal Dutch Shell, Total SA, ConocoPhillips, BP, Occidental Petroleum, Continental Resources, Marathon and Callon climbed between 1% and 4%.
Brent oil surged to the highest level in seven years as physical markets run hot in the world’s largest consuming region and Goldman Sachs Group Inc. said prices are headed for $100 a barrel.
Futures in London surged as high as $88.13 a barrel, a level last seen in October 2014. Prices have gained 12% this year as fears fade over the demand impact from omicron, spurring traders to pay higher and higher premiums for cargoes in Asia. The market has also been supported by a range of supply outages, while a drone attack on oil facilities in the UAE on Monday has flared geopolitical risks.
Goldman Sachs raised its Brent forecasts through 2022 and 2023 and predicted $100 oil in the third quarter. Robust fundamentals have reversed last year’s price slump, keeping the market in a surprisingly large deficit, with the omicron variant having so far had a much smaller impact on demand than delta, it said.
“Demand destruction from omicron has been less than feared, but the main drivers are on the supply side,” said Giovanni Staunovo, an analyst at UBS AG. “Demand keeps rising and spare capacity keeps falling, so that should keep prices supported this year.”