Oil prices continued their bullish trend on Monday on the back of tight supply and the global energy crunch in the run-up to winter.
International benchmark Brent traded at $85.24 a barrel at 1048 GMT for a 0.70% rise after trade in the previous session ended at $84.64 a barrel.
American benchmark West Texas Intermediate (WTI) traded at $84.39 per barrel at the same time for a 0.75% increase from $83.76 a barrel at the end of the previous trading session.
As COVID-19 vaccination rates increase, the global community is closer to the targeted herd immunity, allowing economic recovery to boost global oil demand.
However, the global energy crunch is extending to oil supply along with gas and coal for electricity generation. The rise in coal and gas prices over the past weeks, triggering supply shortages in China, India and Europe, led to power providers switching to oil products, which in turn pushed prices up.
The continued upswing in oil prices was also supported by a surprise draw in US crude oil inventories, which was contrary to the market expectation of an uptick in stocks.
According to the data, US commercial crude oil inventories far exceeded expectations falling by 400,000 barrels during the week ending Oct. 15 against an anticipated 2.2 million-barrel rise.
“Last week’s draw and its depth came as a surprise to the market that expected finally a build of inventories, which didn’t materialize. Another draw would suppress the availability of oil even further and ring even more alarms for market participants and the OPEC group,” according to Rystad Energy’s Senior Oil Markets Analyst Louise Dickson.
The OPEC group is expected to keep its strategy of boosting output by 400,000 barrels per day monthly during its meeting next week, despite some members are struggling to achieve quotas, resulting in the group falling short of its total targets.
Although oil demand is recovering globally, a forecast milder winter in the US is set to limit sales.
According to the National Oceanic and Atmospheric Administration, winter weather in the southern and eastern parts of the country is likely to be warmer than usual.