Oil Climbs 1% on Tightening Crude Supply

By Adedapo Adesanya

Oil prices resumed their climb on Friday on continued tightness in US crude supply even as coal and gas prices eased following fears of gas-to-oil switching.

Brent crude, the global benchmark, made a $1.01 or 1.19 per cent climb to sell at $85.62 per barrel while the United States West Texas Intermediate (WTI) made a $1.30 or 1.58 per cent gain to trade at $83.80 a barrel.

The market is still getting support as supply remains very tight just as the market hit multi-year highs earlier in the week on worries about coal and gas shortages in China, India and Europe, which spurred fuel-switching to diesel and fuel oil for power.

Data from the US Energy Information Administration (EIA) indicated a surprise crude inventory draw of 400,000 barrels for the week to October 15. At 426.5 million barrels, commercial crude inventories remain below the five-year average for this time of the year.

Winter weather in much of the United States is expected to be warmer than average, according to a forecast from the country’s National Oceanic and Atmospheric Administration.

The number of oil and gas rigs – an indicator of oil production in the US fell by one this week. The total rig count is now at 542, up by 255 from this time last year, but still under the 790 active rigs as of March 2020.

The US oil rig count fell this week to 443—a 2-rig decrease—after six straight weeks of additions. The number of gas rigs increased by one and miscellaneous rigs stayed the same.

Despite these, the market is just cautious about the possibility of an uptick in COVID cases in Russia, China and now Germany.

On Friday, Chancellor Angela Merkel of Germany said the European Union must take the necessary steps to mitigate the energy price crisis and warned that this must not come at the cost of the transition to renewable energies.

She also said the pandemic was not yet over as cases recently shot up to more than 17,000 in 24 hours, while the 7-day incidence went up by five percentage points.

Analysts also said some steam had come out of the market as investors were shifting their focus away from soaring crude prices.