This morning crude opened at $71.92. This drop of more than $1 per barrel comes as risk aversion continues to rise, boosting the United States dollar. Falling prices also reflects the output being added back to the market, as many refineries are back online in the U.S. Gulf following two hurricanes in the past few weeks. While we are still on the edge of the beginning of fall, looking ahead to winter forecasts is crucial as they will directly impact prices.
Today Goldman Sachs released new information forecasting boosted oil demand this winter season, triggered by an expected colder winter in Europe and Asia. Because of a potential global increase in wholesale power and gas prices, analysts are warning of higher winter energy bills to come. Analysts suggest that the colder winter could lead to a 900,000 barrels per day (bpd) increase in oil demand, adding to the post-pandemic demand rebound. According to Goldman, “The tightness in global gas supplies creates a clear and potentially meaningful bullish catalyst for the oil market this winter, larger than the downside risk to global oil demand from another Delta-like COVID wave.” If forecasts hold, it will be interesting to see how the market reacts to this sort of winter.
Meteorologists are expecting 2021-22 winter to be one of the coldest and longest in several years. Old Farmer’s Almanac has even suggested that this winter be called the “season of shivers,” referencing the above-average snowfall and below-average temperatures expected to follow the winter surge. In particular, the outlook expects much of the South and western U.S. to receive abnormal winter conditions, especially with dryness in these regions. Of course, these are all forecasts subject to change, but if forecasts hold and there is a longer and colder winter globally, it will be time to bundle up soon.
Are you prepared for a colder than average winter? Download the Mansfield Winter Fuel Guide – 3 Steps for Winter Preparation.