Oil Gains 9.5% In A Month Amid Tighten Supply/Demand Equation

At its meeting next week, OPEC+ is expected to stick to its agreement to add 400,000 barrels per day to its output for November, despite oil rising to three-year highs above $80 a barrel and demand from consumers for more oil.

On September’s last trading day, the New York-traded West Texas Intermediate crude oil closed at $75.03, up 0.3%. WTI gained 9.5% for the month. This brought the three-month increase to 2%.

During Thursday’s session, London-traded Brent crude shed 0.2%, closing at $78.52 per barrel.  In September, Brent gained 7.6%, its highest gain since June. It rose 4.5% in the third quarter.

As part of OPEC+, led by Russia, producers agreed to increase production by 400,000 barrels per day each month to eliminate the cuts of 5.8 million barrels per day. Producers also agreed to evaluate the agreement in December.

In September, OPEC+ agreed to maintain its plans for an output increase in October.

According to its base scenario, the OPEC+ Joint Technical Committee sees a surplus of 1.4 million barrels per day next year, below the previous forecast of 1.6 million barrels per day.

Mr. Mohammad Barkindo, OPEC Secretary-General, said in his opening remarks that the current OPEC+ deal helps maintain market balance.

In his tweet, he noted that the decision by OPEC and non-OPEC ministers to return 400,000 barrels per day each month to the market continues to provide an appropriate balance between incremental increases to meet demand and avoiding any supply overhangs.

Based on demand growth of approximately 6 million barrels per day, the Joint Technical Committee estimates a 1.1-million-barrel deficit this year. Next year, demand is forecast to grow by 4.2 million barrels per day.

As a result of unplanned outages and strong demand recovery, Brent oil rose to a three-year high above $80 a barrel on Tuesday. Wednesday’s prices were near $80 a barrel.

OPEC and the White House say they are working on ways to combat high fuel prices, which were concerns in August.

A spike in crude prices could speed up India’s transition to alternative energy sources, as it is the world’s third-largest importer and consumer of oil.

Iraq’s energy minister and Nigeria’s energy minister said in recent weeks they saw no need to take extraordinary measures to change the existing agreement.

JTC member countries are complying with existing cuts, which in August stood at 116%, meaning they are cutting more than planned, with several having difficulty raising output due to domestic constraints. The tightening supply/demand equation is apparent.

Underinvestment and maintenance issues are preventing Nigeria and Angola, major African oil exporters, from reaching their OPEC+ quotas until at least next year.