Oil Hits Multi-Year Highs Amidst China Energy Crunch
Oil hits multi-year highs on Monday amidst China energy crunch, and tight competition for supply in the market as the global economy continues to heal. In the United States, a stronger dollar has also drive energy costs upward amidst a rising inflation rate.
The Organisation of Petroleum Exporting Countries and allies (OPEC+) has stuck to an incremental easing of its tight supply with 400,000 barrels per day adjustment since August after a consensus was reached between warring members –Saudi and United Arab Emirates in the third quarter of the year.
The price of the OPEC basket of thirteen crudes stood at $83.54 a barrel on Friday, compared with $82.50 the previous day, according to OPEC Secretariat calculations.
The price environment for oil remains constructive amid the ongoing energy crunch in China and tight competition between the rest of Northern Asia and Europe for scarce energy supply, particularly gas, said Jeffrey Halley, senior market analyst at OANDA.
In a Monday note, Halley said Brent crude jumped to $85.65 per barrel and West Texas Intermediate rose to $83.50 a barrel in Asia, pulled up by higher Hong Kong coal futures.
This comes as OPEC+ shows no signs of boosting output and the US government stays mum on strategic petroleum reserve releases, Halley noted.
Another pressure point for oil prices would be the rapid reopening of the aviation sector and reopening announcements from ASEAN last week, according to Halley.
Brent should target the October 2019 high at $86.80 per barrel and move toward $90 per barrel, with support at $84.25 a barrel and $82 a barrel, while WTI has meaningful resistance until the $89 per barrel regions, the analyst said.
If Brent moves to $90 per barrel, OPEC+ could be under increased pressure from the US White House, Halley said.
Chinese data showed third-quarter economic growth fell to its lowest level in a year hurt by power shortages, supply bottlenecks and sporadic COVID-19 outbreaks.
China’s daily crude processing rate in September also fell to its lowest level since May 2020 as a feedstock shortage and environmental inspections crippled operations at refineries, while independent refiners faced tightening crude import quotas. #Oil Hits Multi-Year Highs Amidst China Energy Crunch
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