Oil gains as investors weigh tight supply, demand risks

Bloomberg

Oil rises as investors weighed a tight supply outlook and the potential responses from consumers and policy makers alike.
West Texas Intermediate gained for a second session, trading above $122 a barrel. President Biden will travel to Saudi Arabia next month and will discuss energy production, according to US National Security Counsel Coordinator John Kirby.
The meeting will come at a time of heightened risk to global economy. Key producer group Opec is said to see oil demand growth halving next year amid rampant inflation and the war in Ukraine. Financial markets started the week on back foot as traders price in steep increases in Federal Reserve interest rates.
Russia’s war in Ukraine has made the crude and fuels markets even tighter, with the WTI benchmark soaring more than 60% this year. Several Wall Street banks are expecting further gains in the coming months.
At the same time, Brent’s nearest futures contract is trading more than $3 above the following month, a bullish structure that points to a hard-pressed crude market. That strength has grown in the recent days as Libya suffered a renewed setback to its production.
“Meeting increasingly tight supply and increasingly high demand in coming months presents a significant challenge,” said Saad Rahim, chief economist at Trafigura Group. “Governments around the world are choosing to cushion demand as much as possible for the time being, via subsidies and tax cuts, so the full impact of higher prices may not be felt for some time yet.”
Some Asian buyers have been snapping up Middle Eastern oil earlier than usual in the physical market, in a sign of robust demand. The spot buying activity, which normally picks up pace after the release of official selling prices, started even
before Iraq, Kuwait and Iran had made their announcements.
There has also been significant strength in North Sea market that helps set global Dated Brent benchmark price.