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Highlights
- WTI Crude oil prices surged to a nearly seven-year high on Tuesday.
- The demand for crude oil is rising as the winter approaches the Northern Hemisphere.
- OPEC+ had agreed in July to increase the output by 400,000bpd each month until April next year.
Brent Crude oil prices surged to a three-year high on Monday, triggered by the Organization of the Petroleum Exporting Countries (OPEC) and its allies’ plan to stick to its existing strategy to gradually increase the production in November. On Tuesday, the WTI crude oil prices surged to nearly seven-year high levels.
Brent Crude oil futures for December delivery last traded at US$82.72 per barrel, up 0.01%, whereas WTI crude oil futures for November delivery traded 0.23% up at US$79.11 per barrel, as of 06 October 2021 at 12:20 PM AEDT.
Related Article: Crude oil hits three-year highs on robust demand recovery
The demand for crude oil is rising as the winter is approaching the Northern Hemisphere amid supply disruptions. The prices were also boosted by the recovery in demand, triggered by an ease in global lockdowns and a rebound in economic activity.
OPEC’s supply deal
OPEC along with its allies, together known as OPEC+, agreed in July to increase the output by 400,000bpd each month until April 2022 to phase out the existing cut of 5.8 million bpd. The oil cartel agrees to clear the market's oil glut after the pandemic-led shutdown wiped out energy demand in 2020.
Oil supply constraints | Source: Copyright © 2021 Kalkine Media
The decision of the oil cartel led by Saudi Arabia comes amid a global energy supply crunch and further pressure to increase oil production to cool oil prices. More oil supply into the market means the prices will cool down. OPEC has been facing pressure from leading economies of the world including the US to increase the supply as the prices spiked nearly 50% in 2021.
Related read: A look at five ASX oil and gas stocks amid OPEC’s plan to gradually hike output
Rising energy demand
As per the International Energy Agency (IEA) data, the demand for coal and natural gas have surged to pre-pandemic levels. Oil prices have also been fuelled by a rapid surge in global gasoline prices, which have rocketed by nearly 300%, encouraging consumers to switch to crude oil, dodging gasoline to generate electricity.
Must Read: Oil falls on US crude oil recovery
Bottom Line
Crude oil prices climbed to a three-year high on the back of strong demand after easing global lockdowns and tight oil supplies from the OPEC+ nations.
