October oil prices up on growing demand

Oil prices rose in October despite losing some steam over the past week amid a global energy crunch and growing demand caused by a faster-than-expected recovery in developed economies.

Brent, the international benchmark under which two thirds of the world’s oil trades, gained 7 per cent in October from the previous month, closing at $83.72 at the end of trading on Friday.

West Texas Intermediate, which tracks US crude grades, gained about 11.4 per cent in the month to settle at $83.57.

“Despite early dip-buying, crude prices could still face a deeper correction after such a prolonged and substantial rally over the last couple of months,” said Craig Erlam, senior market analyst for the UK and the Europe, Middle East and Africa region at Oanda.

Oil prices were weighed down by the prospect of Iranian barrels returning to the markets after talks with Tehran, which are scheduled to resume next month.

Although an agreement with Iran is not expected to materialise soon, the longterm outlook for Iranian supply is brighter than before.

“That said, it has come at a good time just as the rally was looking very overcrowded, so it may aid the correction,” said Mr Erlam.

Oil price fundamentals are solid, with oil trading at multi-year highs amid a global squeeze in supply as economies quicken the pace of growth.

Natural gas prices, which are linked to crude, have also doubled this year. However, Henry Hub prices were down 3.93 per cent at $5.555 per million British thermal units at 5.30pm UAE time.

Analysts such as prominent New York University economist Nouriel Roubini expect oil to touch $100 a barrel by the end of this year because of a lack of investment in the energy sector as the world focuses on transitioning to clean energy in an attempt to cut emissions.

Global shortages of natural gas are driving up demand for crude and placing more pressure on strained oil supplies, the International Energy Agency said this month.

This, in turn, is feeding inflation and slowing the world’s recovery from the Covid-19 pandemic.

The agency expects demand to rise by 500,000 barrels per day as a result of the crisis in energy markets.

Oil producers such as Saudi Arabia, the world’s biggest exporter of crude, blamed higher prices for the limited investment in the hydrocarbon and infrastructure sectors, as well as low stock levels.

Opec+ will meet on Thursday to discuss measures to bring back more supplies to the market.

The group is currently on track to add two million bpd back to the markets by the end of the year, through monthly increments of 400,000 bpd.