Oil Climbs On Demand Growth, But Russia, Nigeria Warn Of Market Fragility

by Ship & Bunker News Team
Monday October 25, 2021

Yet more price gains for crude were achieved on Monday as Goldman Sachs noted that gasoline and distillate consumption was back in line with five-year averages in the U.S. – and worries persisted about coal and gas shortages further straining oil inventories.

Brent gained 46 cents to settle at $85.99 per barrel, while West Texas Intermediate remained unchanged at $83.76 per barrel (after reaching $85.41 earlier in the session, the highest since October 2014).

Goldman said the remarkable global demand rebound for oil could push Brent prices above its year-end forecast of $90 per barrel; it also thought the switching from rapidly depleting coal and gas stocks in China, India, and Europe to crude could contribute at least 1 million barrels per day (bpd) to oil demand.

Louise Dickson, senior oil markets analyst at Rystad Energy, remarked, "The global energy supply crunch continues to show its teeth, as oil prices extend their upward march this week, a result of traders pricing in the ongoing rise in fuel demand – which amid limited supply response is depleting global stockpiles."

For its part, the Organization of the Petroleum Exporting Countries (OPEC) and allies will soon open their taps wider: Alexander Novak, deputy prime minister for Russia, told media the cartel is expected to raise its output by 400,000 bpd at its November 4 meeting, as previously agreed.

However, he added that while oil demand is expected to reach a pre-pandemic level by the end of next year, "Demand [for oil] can decline as there is still uncertainty: we also see there is yet another pandemic wave spreading across the world."

Not everyone is in favour of OPEC pumping more: Timipre Sylva, minister of state for Nigeria, told
Bloomberg the cartel must resist pressure to increase output because "we're just coming out of the Covid situation and the market is a little bit too fragile to take chances"; however, he admitted that his country is talking with OPEC to increase its quota.

Meanwhile, an old concern that affected crude trading months ago could soon be revived with the advent of renewed talks between the U.S. and Iran, triggered by the Islamic republic and the European Union set to meet on Wednesday.

The meeting is regarded as a prelude to the resumption of broader talks in Vienna, and the U.S. special envoy for Iran on Monday said a period of "more intense diplomacy" to end the standoff was approaching.