Oil Continues Climb on OPEC+ Decision, Gas Crunch

By Adedapo Adesanya

Following the decision by the Organisation of the Petroleum Exporting Countries and allies (OPEC+) to maintain its production increases by 400,000 barrels per day per month on Monday, oil prices have been bullish.

On Tuesday, the price of the Brent crude rose by 1.51 per cent or $1.86 to sell at $82.77 per barrel, while the US West Texas Intermediate (WTI) appreciated by 2.0 per cent or $1.55 to trade at $79.17 per barrel.

The market has stayed bullish since on Monday when oil producers had the October OPEC+ Ministerial Meeting and agreed to keep plans for easing the cuts unchanged despite calls for more supply from consuming countries, including the United States.

Despite the pressure to ramp up output, OPEC+ was concerned that a fourth global wave of COVID-19 infections could hit the demand recovery.

The lack of urgency alarmed traders who reacted by sending Brent to a three-year and WTI to a near seven-year high.

There, however, remain downside risks that could affect the price rally, most notably China’s power crunch that could upset October refining rates, it will take several days if not weeks until the market starts noticing those signs.

Also supporting oil was the broader energy price rally, which saw record-high gas prices in Europe and coal prices in Europe and Asia surging to multi-year highs.

Soaring wholesale prices have partially been caused by a surge in demand, particularly from Asia, as economies emerge from COVID-19 induced lockdowns with gas-to-oil switch happening especially in Asia.

Also, cold European winter and spring also meant supplies had already been heavily depleted by the summer.

Market analysts noted that since the natural gas crunch began, oil consumption has increased by around 500,000 barrels per day.

Meanwhile, US crude oil and distillate inventories are likely to have fallen last week, with estimates noting that crude stockpiles declined by about 300,000 barrels in the week to October 1 ahead of official data from the Energy Information Administration (EIA) expected on Wednesday.