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Oil posted a monthly gain of 11% on signs that consumption is outpacing supply and draining stockpiles.
Futures in New York rose 0.9% on Friday. Oil’s advance this month shows the impact of an ongoing shortage of natural gas, which has boosted demand for oil products. At the same time, rising margins signal that crude consumption will remain strong as refiners continue to process more to meet demand. That could mean that global oil stockpiles will continue to fall in the coming months.
Meanwhile, traders continue to assess the possibility that the Organization of Petroleum Exporting Countries and its allies will increase output further. The group will meet Nov. 4 to review their plans to gradually restore some more of the production they halted during the pandemic.
“The oil market deficit might be smaller than traders initially thought, but it will not go away anytime soon,” said Ed Moya, senior market analyst at Oanda Corp. “Crude prices could resume their bullish stance if OPEC+ stays the course with their gradual output increase plan.”
Oil has been one of the standout performers among commodities as a gas-centered energy crunch has buoyed demand for petroleum products. Thus far, OPEC+ has argued that cautious monthly supply increases of 400,000 barrels a day are appropriate as risks remain. Meanwhile, natural gas prices have tumbled after Russia signaled on Thursday that Russia will send extra gas to Europe next month.
Oil majors Chevron Corp. and Exxon Mobil Corp.’s better-than-expected earnings reports on Friday also signaled to markets the possibility of increased capacity to produce additional barrels. The oil majors are plowing windfall profits into share buybacks as soaring energy prices boost their cash flow.
With commuting and air travel picking up, there’s “strong demand across our products with more recovery expected” during the current quarter, Chevron Chief Financial Officer Pierre Breber said in an interview.