Oil prices were set early on Friday to end the month of October with a 10-percent gain as the global energy crunch and rebounding demand have reduced inventories and tightened the oil market.
Prices started October at below $80 a barrel. But OPEC+ keeping supply tight, rebounding global demand, and the rally in other energy commodities have pushed prices to multi-year highs this month.
By the middle of October, WTI Crude prices had already hit the highest level since October 2014 at $83.73, while the international benchmark had briefly jumped above $86 per barrel at $86.04, which was the highest price since October 2018. Tighter global oil supply and dwindling U.S. crude inventories sent Brent to a fresh three-year high of $86.10 per barrel on October 21.
Early in October, OPEC+ supported oil prices after deciding to proceed with a 400,000 bpd increase in supply in November, despite calls from consuming nations—including the U.S.—to boost supply more.
The natural gas crisis in Europe and record-high prices of LNG and coal in Asia have further driven oil prices higher in October.
Meanwhile, industry stocks globally and in the United States have continued to draw down in recent weeks.
Preliminary data compiled by the International Energy Agency (IEA) showed OECD industry stocks fell by 23 million barrels in September to stand 210 million barrels below their five-year average and at their lowest level since March 2015.
U.S. commercial crude inventories have also been drawing for most of October, except for the latest reporting week to October 22, which showed an inventory build of 4.3 million barrels that put the brakes on the oil price rally.
Crude oil prices saw “a small two-day correction that quickly ran out steam given the focus on tight market conditions as consumption continues to outpace supply,” Saxo Bank’s strategy team said on Friday.
“The tightness can be seen in the very elevated time spreads, especially in WTI where dwindling stocks at Cushing, the delivery hub for WTI, has resulted in a very elevated spot price relative to the following months,” the bank’s analysts added.
By Tsvetana Paraskova for Oilprice.com
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