Oil prices could hit
Strategists told CNBC that as winter comes and OPEC and its partners stick to their previous accord on oil supply. As a result, oil prices might suffer an “off the charts spike.”
OPEC+, the Organization of the Petroleum Exporting Countries and their allies, including Russia, has been under pressure from key customers such as the United States and India to increase supplies after oil prices have risen by 50% this year.
However, on Monday, the oil cartel agreed to stick to an existing agreement to increase oil output by 400,000 barrels per day (bpd) in November, dismissing pleas to pump more oil. OPEC+’s decision was a “quite prudent course of action,” according to John Driscoll, chief strategist at JTD Energy Services until one considers the ongoing energy issues and potential supply interruptions.
He cited the UK’s petrol shortage, which resulted in enormous lines of automobiles waiting to fill up, as well as “fistfights.” People in the United Kingdom have been buying fuel in a frenzy, generating shortages and straining fuel supply lines. What you have to worry about when you go into winter is this non-discretionary demand,” Driscoll added. Non-discretionary market refers to spending on necessities such as food and shelter.
Oil Supply chain issue
What is especially concerning, according to Driscoll, is a low inventory or any supply chain issue. The panic purchase of petrol in the United Kingdom has stressed supply systems, partly due to a significant shortage of truck drivers due to Brexit and the United Kingdom’s new economic relations with the EU. As a result, the United Kingdom has had to rely on the army to transport fuel. You may see an off-the-charts surge. That is one scenario Driscoll said of oil prices. Given the unpredictability surrounding weather and climate change, I believe we are in for a wild ride here.
Following the OPEC+ decision, oil prices reached a three-year high. Brent was last trading at $82.47 per barrel during Asia hours on Wednesday morning, while WTI was $78.84.