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Brent oil dips after topping $80 a barrel, highest since Oct, 2018

imageCommodities7 minutes ago (Sep 28, 2021 11:47AM ET)

(C) Reuters. FILE PHOTO: An employee holds a sample of crude oil at the Yarakta oilfield, owned by Irkutsk Oil Co, in the Irkutsk region, Russia on March 11, 2019. REUTERS/Vasily Fedosenko/File Photo

By Ahmad Ghaddar

LONDON (Reuters) -Brent oil dipped on Tuesday after topping $80 per barrel for the first time in nearly three years, as the rally ran out of steam when power shortages in China whit factory output.

Brent dipped $1.15, or 1.5%, to $78.38 a barrel at 11:17 a.m. EDT (1517 GMT), after reaching the highest since October 2018 at $80.75.

U.S. West Texas Intermediate (WTI) crude lost $1.03, or 1.4%, to $74.42 a barrel, after hitting a session high of $76.67, its highest since July.

Prices face headwinds from a power crunch in China, the world’s biggest energy consumer.

“Recent power rationing to industries in China to drive down emissions could weigh on economic activity, potentially offsetting the tailwind from incremental diesel use in power generation,” investment bank Barclays (LON:BARC) said.

Profit-taking at session highs also pressured Brent, and some investors worried that contagion from a Chinese housing bubble could hit the country’s economy and oil demand, said Louise Dickson, senior oil markets analyst at Rystad Energy.

Still, Dickson said Brent’s scaling $80 highlights how growing fuel demand and worries about tight supply have become the market’s new theme, a reversal from earlier in the pandemic when demand crashed.

Hurricanes Ida and Nicholas, which swept through the U.S. Gulf of Mexico in August and September, damaged platforms, pipelines and processing hubs, shutting most offshore production for weeks.

Top African oil exporters Nigeria and Angola will struggle until at least next year to boost output to quotas set by the Organization of the Petroleum Exporting Countries (OPEC), sources at their respective oil firms said, citing underinvestment and maintenance problems.

Several other members of the OPEC+ group of producers, which cut output during the pandemic, have also been having trouble ramping up to meet recovering demand.

“Oil markets are accelerating, as a persistent supply deficit is shrinking the inventory cover to the lowest level in decades,” Barclays said in a note.

The bank raised its 2022 Brent price forecast to GBP77 a barrel, pegging WTI at $74.

Morgan Stanley (NYSE:MS) sees Brent trading at $77.5 a barrel in the third quarter under a base case and at $85 in a bull case.

India, the world’s third-biggest oil importer, signalled that a spike in oil prices would speed up the transition to alternative energy sources.

Oil demand will grow sharply in the next few years as economies recover from the pandemic, OPEC forecast on Tuesday, adding that the world needed to keep investing in production to avert a crunch despite an energy transition.

Brent oil dips after topping $80 a barrel, highest since Oct, 2018

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