Oil prices went up sharply this Monday, as demand keeps getting stronger from economic recovery and Covid-19 restrictions easing. Also, supplies are still tight, despite China releasing diesel and other fuels from its reserves to stabilize prices in some regions.
Firstly, according to Reuters, Brent crude futures were up 84 cents, 1%, to $84.56 a barrel, after reaching a low session of $83.03. On the other hand, the West Texas Intermediate gained 61 cents, 0,7% to $84,18; after hitting a low session of $82,74.
As we reported earlier, the outlook for oil prices to year’s end is positive; according to Reuters, it will hold near $80 due to tight supplies and soaring commodity prices, which encourage a switch to crude for power generation. However, Goldman Sachs says oil prices could reach $90 by the end of the year.
Moreover, last week, oil prices reached multi-year highs; boosted by the post-pandemic demand and tight supplies from a key exporting group. Earlier in the year, the Organization of Petroleum Exporting Countries, and allies, agreed to keep a monthly production increase of 400,000 barrels per day. The decision came despite US asking for more production.
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Oil prices to remain bullish as production and supplies are still tight
However, the increase from OPEC for October came short of what the market demands; as outages in smaller countries higher supplies from Saudi Arabia and Iraq.
Furthermore, OPEC will most likely stick to the 400,000 barrels increase for November, to be agreed upon at OPEC’s next meeting with members Kuwait and Iraq. Both countries recently voiced their support to continue with the planned increases instead of pumping more.
On the other hand, as we reported earlier, the US has been asking for OPEC to increase oil production to contain rising gasoline prices. In fact, Joe Biden on Saturday urged major G20 energy-producing countries with spare capacity to boost output to ensure a stronger global economic recovery. According to analysts, this would be a tactic by the US government to pressure OPCEC to raise supplies.
Finally, Exxon and Chevron are looking to double their oil production; particularly, they are looking to add drilling rigs in the Permian shale basin.
