U.S. inventories fell, OPEC increased production slowly, U.S. oil broke through the 84 mark and continued to hit a new high in nearly seven years

On Friday (October 22), U.S. oil rose 1.48 US dollars in late trading, or 1.79%, to close at 83.98 US dollars per barrel. This week, it has risen 1.8%, which is the longest consecutive week of rising since 2015. Bilbao oil rose 1.16 US dollars to close at 85.77 US dollars per barrel. The indicator crude oil hit a three-year high of US$86.10 on Thursday and rose 1% this week, marking the seventh consecutive week of closing high. As OPEC and its allies once again failed to meet their production targets, the global recovery from the coronavirus epidemic exacerbated supply shortages, and the low crude oil inventories at the Cushing Storage Center in Oklahoma, this week. Oil prices bring support.

U.S. President Biden said late Thursday that Americans should expect high gasoline prices to continue until next year, given OPEC and other oil-producing countries control production. John Kilduff, a partner at Again Capital LLC, said that although oil prices have fluctuated significantly over the past two trading days, structural tightness in supply has always been the biggest driver of the market. No one in the market really expects OPEC+ to increase production significantly in the near future.

Oil prices soared this week to their highest level since 2014, as the market is concerned that consumption is growing faster than supply. Concerns about shortages of natural gas and coal in India and Europe have boosted oil prices, and this shortage has caused some power plants to switch to fuel oil and diesel for power generation. Saudi Arabia pointed out that any additional crude oil from OPEC+, an organization of oil-producing countries, will not help to curb the soaring cost of natural gas, and predicts that if winters in the northern hemisphere are colder than usual, oil demand may increase by as much as 600,000 barrels per day.

US Energy Information Administration (EIA) data released on Wednesday showed that Cushing's crude oil inventories fell to 31.2 million barrels, the lowest since October 2018. David Martin, Head of Commodity Strategy at BNP Paribas, said that I think prices are a good indicator of tight market conditions, and the market will become tighter. Inventories will decline this quarter and the next.

Leaders of many countries around the world worry that the demand disruption caused by the new crown epidemic may not be over, which has weakened the bullish sentiment driven by tight supply. After German Chancellor Angela Merkel stated that the epidemic has not ended, oil prices fell briefly. Phil Flynn, senior analyst at Price Futures Group, said that the supply is still very, very tight, and the market is only cautious about the possibility of new cases in Russia and Germany rising.

At the same time, according to the forecast of the National Oceanic and Atmospheric Administration of the United States, winter weather in most parts of the United States is expected to be warmer than average, which may add resistance to the long-term rise of oil prices.

Earlier data released by the oil service Baker Hughes showed that as of the week of October 22, the total number of wells in the United States was 542, and the number of oil and gas rigs was reduced for the first time in seven weeks. The total number of oil rigs decreased by 2 from last week to 443, and the total number of natural gas rigs increased by 1 to 99.

(U.S. Oil Hour Chart)