Oil prices rise on tightening supply and strong demand
SINGAPORE: Oil prices rose on Monday over supply concerns in the Middle East and as the US market showed further signs of tightening while demand in Asia keeps rising.
Brent crude futures, the international benchmark for oil prices, were at $57.84 at 0056 GMT, up 9 cents, or 0.16 per cent, from their last close. US West Texas Intermediate (WTI) crude futures were at $52.03 per barrel, up 19 cents, or 0.37 per cent.
“Oil prices are holding comfortably above $50 as possible supply disruptions in the Kurdish region of Iraq support prices,” said William O’Loughlin, investment analyst at Rivkin Securities.
“US production was also recently impacted by a hurricane for the second time in as many months and the number of US drilling rigs declined for the third week in a row,” O’Loughlin said.
The amount of US oil rigs drilling for new production fell by seven to 736 in the week to October 20, the lowest level since June, General Electric Co’s Baker Hughes energy services firm said on Friday.
Much will depend on demand to guide prices, with the US market tightening, flows from Iraq reduced due to fighting between government forces and Kurdish militant groups, and production still being withheld as part of a pact between the Organization of the Petroleum Exporting Countries (Opec) and non-Opec producers to tighten the market.
In the main growth areas of Asia, consumption remains strong especially in China and India, the world’s number one and three importers. India imported a record 4.83 million barrels per day (bpd) of oil in September as several refiners resumed operations after extensive maintenance to meet rising local fuel demand.
The country’s September imports stood 4.2 per cent above this time last year and about 19 per cent more than in August, shiptracking data from industry sources and Thomson Reuters Analytics showed.
Given the tightening oil market conditions, many analysts expect prices to rise further.
“We will see oil prices higher by 10 per cent by the end of the year.
We have started to accumulate strong positions within the oil sector,” said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers. — Reuters