- Oil prices are on course for a third consecutive weekly gain, with WTI nearing $91 per barrel and Brent trading above the $94 per barrel mark.
- News that Chinese refiners broke refining rate records in August only added to the bullish sentiment caused by Saudi Arabia’s production cuts.
- As oil prices soar, the IEA has warned that peak oil demand is looming, a warning that was firmly rebuked by OPEC.
By Irina Slav
Crude oil prices were set for a third week of increases today, lifted by the growing imbalance between demand and supply, and by China’s latest industrial output report, which showed faster-than-expected growth in August.
Brent crude was trading above $94 per barrel at the time of writing while West Texas Intermediate flirted with the $91 per barrel mark. Bullish sentiment only increased on the news that Chinese refiners broke refining rate records in August.
They processed an average daily of 15.23 million barrels, which was 19.6% higher than a year ago, official statistical data showed.
The main reason for the price jump, however, remains the production cut coordinated by Saudi Arabia and Russia. The International Energy Agency in its latest monthly report warned that cuts would tip the oil market into a deeper imbalance in the fourth quarter.
At the same time, the IEA forecasted peak oil demand before 2030, which prompted an immediate reaction from OPEC. Consistent data-based forecasts show that peak oil and other fossil fuel demand will not happen before 2030, as the International Energy Agency claimed earlier this week, OPEC said on Thursday, dismissing the claims of the “beginning of the end of fossil fuels.”
Indeed, warnings about peak oil demand have been numerous in recent years, all based on EV penetration rates that have so far failed to materialize. Instead, global oil demand has continued to rise, hitting a record this year, per the IEA itself. And oil trade is getting more popular, too.
“Betting on oil is becoming a favourite trade on Wall Street. No one is doubting the OPEC+ (oil-producing nations) decision at the end of last month will keep the oil market very tight in the fourth quarter,” OANDA analyst Edward Moya told Reuters.
“Heading into the fourth quarter, the market looks a lot tighter,” Ben Cahill, senior fellow at the Center for Strategic International Studies, told Bloomberg. “The supply cuts from OPEC+ are starting to bite and it looks like we’re heading for a pretty significant supply deficit — so that does mean it’s bullish for prices.”
As well as higher prices, the IEA has warned that OPEC+ production cuts have set the stage for volatility to surge due to the draining of global oil inventories and the building of spare capacity amongst OPEC members.
NB: Irina Slav wrote this article for Oilprice.com
