Strong Demand Keeps Oil Prices Up as Energy Crunch Bites
Strong demand for crude oil keeps prices up on Tuesday as the energy crunch bites across the globe. Oil prices rose on Tuesday offsetting earlier losses, as demand concerns intensified from the easing of pandemic restrictions and the upcoming winter heating season amid the energy crunch.
Prices stay near multi-year highs as an energy supply crunch continued while falling temperatures in China revived concerns over whether the world’s biggest energy consumer can meet domestic heating needs.
International benchmark Brent traded at $84.76 a barrel for a 0.51% rise after trade in the previous session ended at $84.33 a barrel.
American benchmark West Texas Intermediate (WTI) registered at $82.36 per barrel at the same time for a 0.82% increase from $81.69 a barrel at the end of the previous trading session.
Oil market data shows that Brent price has gained nearly 7% in October 2021, and WTI has expanded by about 10%.
Soaring coal and gas prices, which are making oil a more desirable alternative for power generation ahead of the winter heating season, are also triggering demand concerns, outstripping supply and driving oil prices up.
Prices were also supported by announcements in the US, Australia and across Asia over the lifting of restrictions from COVID-19, which are expected to boost fuel consumption. However, weak data on US industrial output and disappointing China macroeconomic data are stoking demand concerns.
US industrial production fell short of market expectations and decreased month-on-month by 1.3% in September, according to data released by the Federal Reserve on Monday.
The Chinese economy, the world’s second-biggest economy, grew by 4.9% in the third quarter, also below expectations.
The slowdown was primarily due to a deceleration in the housing sector and the energy supply shortage. Accordingly, the country’s industrial output also fell below the market forecast by 3.1%.
On the supply side, US production from shale basins is expected to rise in November, according to the Energy Information Administration’s Drilling Productivity Report on Monday.
Colder weather has already started to grip China, with close to freezing temperatures forecast for northern areas, according to AccuWeather.com
Coal futures in China rose as much as 7.8% on Tuesday, while riskier assets such as equities also gained. The rising coal and natural gas prices in Asia are expected to cause some end-users to switch to lower-cost oil as an alternative.
However, the power crunch that is sending prices higher is also hurting Chinese economic growth, which fell to its lowest in a year, official data showed on Monday.
China’s daily crude oil processing rate also fell last month, dropping to the lowest since May last year. Helping to keep a lid on prices, U.S. oil output is set to rise. Production in the largest shale formation in the world’s biggest oil producer is expected to gain further next month, the Energy Information Administration said. # Strong Demand Keeps Oil Prices Up as Energy Crunch Bites
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