Oil Market Outlook
The crude market gained support from growing oil demand for heating and industrial use as natural gas shortages have sent prices soaring. A steady pickup in travel and other economic activity in line with falling Covid cases and rising vaccinations in many countries also fed the oil demand recovery.
West Texas Intermediate (WTI) crude rose $1.90 on the week to close at $75.88 per barrel. Brent gained $1.19 to $79.28 and Dubai crude averaged $75.85. Thaioil forecasts that WTI this week will trade between $73 and $78, and Brent between $77 and $82. Prices are expected to fluctuate as the market responds to a key Opec+ meeting set for today. Traders are also keeping a wary eye on rising inflation, which is being fed in part by higher energy prices, and how the dollar reacts. Among the factors expected to influence trade:
■ Opec and its allies are expected to lift output by 400,000 barrels per day as planned in November when they meet today, despite requests from several countries including the US for a bigger increase to keep prices in check. Bloomberg reported that output in September rose 360,000 bpd, 40,000 less than agreed, as some members including Nigeria and Angola, have been struggling to meet quotas because of delayed maintenance and underinvestment.
■ PetroChina and Hengli Petrochemical won bids for 4.4 million barrels or 60% of the total offered in energyshort China’s first auction from its strategic petroleum reserve (SPR), aiming to lower raw feedstock costs for domestic refiners. The prices were $65-70 per barrel, lower than market prices. According to Wood Mackenzie, China is expected to auction off up to 82.5 million barrels from the 340 million barrels in its reserves.
■ Widespread power outages in China, especially in the northeastern region, are forcing several industrial plants to reduce or shut down production. Coal-fired power plants are running below capacity, in keeping with Beijing’s pledges to curb fossil fuel use, but that is posing a challenge now that power generation is falling short of demand.
■ US crude inventories in the week to Sept 24 rose by 4.6 million barrels, contrary to analysts’ forecasts for a decline, as output increased 500,000 bpd from a week earlier to levels seen before Hurricane Ida. Refinery utilisation rates rose 0.6 points to 88.1% of capacity.
■ Goldman Sachs forecasts Brent crude could reach $90 by year-end as the market has been tightened due to the quick demand recovery and high gas prices.
■ Economic indicators to watch include euro zone and US services PMI updates and German industrial production.