The oil prices have climbed considerably on Friday and are heading for more than 2% profits for the week. The signs of increasing demand and tighter supplies have caused this increase. The increased demand is partly because the high prices of coal have made users switch to oil products.
Brent has experienced a 0.7%, or 62 cent increase in price. Summing its total price to $84.62 per barrel. It’s predicted that prices would rise for six consecutive weeks. Experts believe up to a 2.7% increase in prices can be seen this week only.
WTI has experienced a 0.7%, or 56 cent increase in price. Summing its total price to $81.87 per barrel. It’s predicted that prices would rise for eight consecutive weeks. Experts believe up to a 3.2% increase in prices can be seen weekly.
Reasons for the increase in price
These increases in the price levels are directly related to the sharp drop in OECD oil stockpiles, which is reportedly the lowest since 2015. After the recovery from the COVID-19 pandemic, the demand levels have increased substantially. On the other hand, the high cost of coil and gas has forced many users to switch to oil. With these two factors and the low level of the oil supply, the prices are expected to increase even further.
OANDA senior analyst Jeffrey Halley referred to the Asian markets chasing the high prices as another reason why the prices are expected to move further high. One of the signals for upcoming higher energy prices is the fact that Asian markets are willing to purchase resources at their highest price.
Will oil get cheaper?
The International Energy Agency has also predicted a boost in oil demand by 50,000 barrels per day led by the severe shortage of energy-producing resources. With that estimation, by the end of the year, there will be a supply gap of 700,000 barrels per day. That is only if the OPEC+ does not increase the supply of the oil by that time.
Commonwealth Bank commodities analyst, Vivek Dhar, considered these rising prices of oil as a benefit to the oil industry and believes that many of these changes are closely related to weather changes.
The RBC Capital Markets analysts also believe that the oil industry is preparing for a strong bull season led by two main factors: supply tightening and demand strengthening both happening simultaneously.
As a result of these sharp increases in this industry, investors have made a bigger than expected profit from their shares in the US crude stocks. 420.9 million barrel increase as opposed to the analysts’ expectations which was a 702,000 barrel rise.