World oil prices surpass record high

The observed autumn rally in the global oil market is more moderate than in the gas one, yet in mid-October the barrel price still reached the three-year high level: Brent crude oil exceeded the $85 per barrel mark for the first time since 10 October 2018. There is be little doubt it will reach $90 this fall.

This month, the price support incentive for black gold was first the "cartel" results, and later the field-specific reporting and forecast publications.

After a meeting of the monitoring committee on October 4, the ministers of OPEC+ member states agreed to adhere to the July-adopted plan stipulating an oil production increase by 400 thousand barrels per day (b/d) in November. That is, the market won't get any extra volumes until late fall.

The situation being what it is, the US Energy Information Administration (EIA) raised forecast for average Brent price this year from $68.61 to $71.38 per barrel.

The World Bank is at one with the EIA, having predicted an $70 per barrel for 2021 in its October report.

The latest one by the International Energy Agency (IEA) also strengthened stock market bullish sentiment, claiming that global oil demand in 2021 will grow by 5.5 million b/d to reach 96.3 million b/d. Yet in September, demand growth was estimated at 5.2 million b/d.

According to the IEA, September saw a global oil production decrease by 260 thousand b/d to 96 million b/d, even though OPEC countries increased production by 340 thousand b/d to reach 27.15 million b/d. The probable reason was a shutdown of production facilities in the Gulf of Mexico over Hurricane Ida, as well as repair and maintenance work at a number of fields in Canada and Norway.

In turn, OPEC expects a production decline by non-cartel countries by 221 thousand b/d as of 2021.

The US debt ceiling also has a positive effect here, having been raised by $480 billion in mid-October. Part of this currency issue will eventually blend into the materials sector. The oil market has so far barely responded to the alarming "Covid" signals. This is as plain as can be – as the vaccination campaign propaganda works, the participants in exchange trade do accept it heart and hand. That is, traders prefer to disregard hidden risks, given that COVID-19 mutations being detected have extensive resistance to popular vaccines.

Moreover, the ongoing pandemic issue, moves by the US Federal Reserve to strengthen the dollar, and additional Iranian oil (if Washington waters down sanctions against Tehran) form an entire list of "bearish" aspects.

The permanent mantra appeal by the US authorities to OPEC is still there concerning the need to restrain or reduce oil prices. A no-win message so far. At a public meeting in Baltimore (Maryland) on October 21, US President Joseph Biden once again blamed the nation's troubles on the oil cartel, saying OPEC's policy entailed inflated fuel prices for the American market. At the same time, Biden complained that no fuel price decreases should be expected before early next year.

In fact, the American leader ignores the alliance's strategic mission and OPEC+ deal's value to the global oil market, which demonstrated its particular efficiency in overcoming the conjuncture pit in spring last year when black gold market quotations turned negative.

Russian President Vladimir Putin reminded the world of OPEC+ importance. "Russia is a responsible OPEC+ member. We assume the agreement will remain valid until the end of next year, 2022," Putin said at the plenary session of the Russian Energy Week international forum.

For the time being, oil is getting more expensive over an unprecedented price increase for energy substitutes either, i.e. gas and coal. So expert forecasts that the barrel will imminently overcome the $100 psychological threshold no longer seem fantastic, as it was a year and a half ago. All of this is yet more proof that energy market is hardly predictable. There are also new "black swans" here that may check in any tick of the clock.