Prices have steadily climbed since late August and were given a further boost when Hurricane Ida shut down a chunk of U.S. Gulf Coast offshore oil production. Meanwhile, the latest analysis from the Organization of Petroleum Exporting Countries shows a looming supply crunch in the summer of 2022. OPEC’s analysts now see global oil demand increasing by 4.15 million barrels a day in 2022, compared to the level expected for this year, an upward revision of 860,000 barrels a day from what they forecast a month ago.

U.S. supply restraints have caused Brent and WTI benchmark crude’s so called times preads to strengthen. WTI crude for December delivery settled at $6.23 a barrel higher than that for supply in the same month next year. That’s the biggest premium in more than a month.

The Energy Information Administration report also showed that national gasoline and distillate inventories each declined by nearly 2 million barrels. A sharper drop would have likely occurred had petroleum consumption not been affected by recent U.S. Gulf Coast storms.

Additionally, offshore natural gas production has been slow to recover since the recent storms, causing prices to rally. That might prompt power companies to use petroleum products such as fuel oil to run as feedstock in their plants, according to Sallee. “That will buoy crude prices even higher,” he said.

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