U.S. oil tops US$85 as Saudi Arabia vows caution on supplies


Oil in the U.S. rallied above US$85 a barrel for the first time since 2014, another landmark in a surge in global energy prices, while an eye-watering rally in market structure deepened. 

West Texas Intermediate rose as much as 1.6 per cent, while global benchmark Brent also rallied. Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told Bloomberg Television at the weekend that producers shouldn’t take the increase in prices for granted. That conservative stance was echoed by both Nigeria and Azerbaijan.

The most recent leg higher in the market has been led by the market’s structure, which has been rallying even faster than headline crude prices. WTI for immediate delivery was trading more than a dollar higher than the next month as traders pay premium prices to secure supplies, a bullish structure known as backwardation. The closely watched spread between the nearest two December contracts was the strongest since 2013 and trading at beyond US$12 a barrel. 

Oil has more than doubled over the past 12 months, and coupled with a global energy crunch it is fanning inflationary concerns. So far, there appears to be little end in sight for the rally, and Wall Street has been steadily upping its views of the market, expecting prices to trade higher for longer. Goldman Sachs Group Inc. says consumption is on the cusp of returning to pre-COVID levels, while the Organization of Petroleum Exporting Countries and its allies have been restrained in easing the draconian supply cuts imposed in 2020 to salvage prices. 

“Continuous global stock drawdowns are still widely anticipated in the coming months and only a dent in demand growth could change the underlying sentiment,” said Tamas Varga, an analyst at brokerage PVM Oil Associates. 

Prince Abdulaziz said that demand may increase 500,000-600,000 barrels a day if the Northern Hemisphere’s winter is colder than normal and companies switch from gas to crude, he also cautioned that more barrels from OPEC+ would do little to curb costs of gas in Europe and Asia or gasoline in the U.S.


  • Brent for December settlement added 1.1 per cent to US$86.48 a barrel at 8:29 a.m. in New York
  • WTI for December delivery rose 1.5 per cent to US$85.01 a barrel
  • The strength in the oil market is being dominated by a relative scarcity of so-called light-sweet barrels, which are low in sulfur and produce more lighter products like gasoline. Brent’s premium to the middle eastern Dubai benchmark is the biggest since 2018, which could spur buyers in Asia to shun European crude purchases. At the same time, WTI is pricing at its smallest discount to Brent since July, a move that’s likely to curb U.S. export flows to Europe. 
  • The bullish sentiment in recent days was also buoyed by extra import quotas for a Chinese mega refiner. Zhejiang Petroleum and Chemical Co. was given 12 million tons of additional quota for the rest of this year as it starts a new plant. 

Related coverage:

  • U.S. oil producers don’t appear to be responding to the price signal from the market – at least that’s what rig data implies.
  • A weather phenomenon that typically delivers harsher winters is on the way and expected to add to Asia’s energy crisis.
  • Some of the biggest commodities desks on Wall Street have been lifting their long-term price forecasts, often by US$10 or more.