Oil surges to highest since 2014 as Opec sticks to supply plan

[NEW YORK] Oil in New York jumped to the highest since 2014, with Opec+'s decision to proceed to hike output gradually surprising some investors who had expected a bigger increase in the wake of a shortage of natural gas.

US crude futures advanced as much as 3.3 per cent on Monday. Opec+ ministers ratified the 400,000 barrel-a-day supply hike scheduled for November after a short video conference on Monday, said the group in a statement.

The decision comes as the world's biggest oil company, Saudi Aramco, said the global natural-gas crisis has boosted demand for crude by 500,000 barrels a day.

"The consensus was that it was going to be an 800,000 barrel-a-day temporary boost in November," said Rob Thummel, a portfolio manager at Tortoise, a firm that manages roughly US$8 billion in energy-related assets.

The crude market has tightened significantly, following the economic recovery from the pandemic and supply disruption in the US Gulf of Mexico due to Hurricane Ida. Surging natural gas prices have also raised the prospect of increased demand for oil products for power generation and are boosting inflationary pressures on the global economy.

Modelling from the Organization of Petroleum Exporting Countries and its allies shows oil demand will outstrip supply over the next two months.

Opec+ production policy will be the main factor influencing oil prices over the coming months, said the Vitol Group. There is little chance of Iranian barrels returning this year, and US shale producers are not investing enough to raise output quickly, Mike Muller, head of Asia for the oil trading house, said Sunday in a webinar hosted by Dubai-based consultant Gulf Intelligence.

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