DTN Oil

WASHINGTON, D.C. (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled the first trading day of the week sharply higher, lifting both crude benchmarks as much as 3% intrasession. This was after Organization of the Petroleum Exporting Countries, in consortium with Russia-led partners, agreed to maintain gradual monthly production increases of 400,000 bpd though November -- despite signs of accelerated demand growth from gas-to-oil power switching in energy-starved European Union and China. Analysts believe this decision could quickly tighten the global oil market this winter.

International crude benchmark Brent for December delivery traded at $82 bbl Monday, a three-year high on the spot continuous chart, propelled by a somewhat-expected decision from OPEC+ to keep planned production increases intact. The alliance currently withholds 4.6 million barrels per day (bpd) from the global oil market, adding 400,000 bpd each month until the remaining production cuts enacted in April 2020 are phased out.

Russian Deputy Prime Minister Alexander Novak praised the decision as necessary to maintain market stability. Yet, a sustained price rally and a rapid drawdown in inventories have prompted renewed calls -- most notably from Washington -- for the group to consider restoring production more quickly than planned.

"We continue to speak to international partners, including OPEC, on the importance of competitive markets and setting prices, and doing more to support the recovery," the White House said on Sept. 28. White House national security adviser Jake Sullivan said in early August the 400,000 bpd monthly increment "is simply not enough."

China and India -- the world's second and third largest oil consumers -- indicated that a spike in crude prices would undermine recovery in oil demand and speed up the transition to alternative energy sources. In China, widespread power outages have already prompted government officials to roll out various electricity rationing measures to conserve fuel ahead of the peak winter demand season.

Even within OPEC+, some members are questioning the rationale behind continued price increases, particularly given the potential for surging European and Asian gas prices to shut-in a chunk of industrial and transportation operations. The group's Joint Technical Committee, which reviews market conditions ahead of the ministerial meetings, noted this week that "tightness in the gas market could further drive demand for substitute fuels ... should winter be colder than normal."

Iraq's oil minister, Ihsan Abdul Jabbar stated that an oil price of $100 per barrel was unsustainable, and that OPEC desired stable markets.

Next, investors await Saudi Aramco's price decision for Asian and European-bound crude, with consensus calling for Saudi's national oil company to cut its official selling prices for the second consecutive month in November.

Saudi Aramco is seen trimming its November official selling prices for Asia-bound crude by at least 20 cents/bbl after discounting it by more than $1/bbl in October.

On the session, NYMEX November West Texas Intermediate futures spiked $1.74 to settle at $77.62 bbl, and ICE December Brent contract rallied $1.98 for a $81.26 bbl settlement. NYMEX November ULSD futures advanced 5.39 cents or 2.2% to $2.4366 gallon and front-month RBOB futures surged 5.85 cents to $2.3085 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com