Shortage in supply of oil drove the price high

The oil prices have settled near $85 per barrel on Tuesday. This price is close to a multi-year high. It is mainly supported by signals from OPEC and its allies, that the supply is falling short. However, the US inventories are still expected to be on a rise.

The production of OPEC’s oil increased in October. This increase undershot the rise planned under a deal with allies, due to involuntary outages and limited production capacity of some smaller producers.

Brent Crude oil remained unchanged at the price of $84.71 per barrel by1100 GMT.

U.S. West Texas Intermediate (WTI) crude declined 18 cents, or 0.2%, to the price of $83.87 per barrel.

Jeffrey Halley, the OANDA’s Senior Market Analyst for the Asia Pacific has said earlier this week that the oil rally faces some headwinds movements this week. He has also mentioned that oil production levels signal a range-trade pattern before the start of the OPEC+ meeting on Thursday.

The price of Brent oil has a significant increase of more than 60% in 2021. This price is higher than the three-year high of $86.70 and is resulted as the demand recovers and the Organization of the Petroleum Exporting Countries and allies led by Russia, or OPEC+ eases on the cuttings of output.

Outlook for Future

It is likely that the demand for Crude oil will increase as winter is approaching. However, the supply is expected to remain relatively the same.

OPEC+, which cut output by almost 9.7 million barrels per day or about 10% of daily demand in 2020, has been gradually increasing the production by 400,000 barrels per day, despite calls for higher production from the US and other consumers.

The US crude inventories are expected to have another rise this week. A poll conducted has sown an increase of 1.6 million barrels. The supply report of this week will be published by the industry group the American Petroleum Institute at 2030 GMT.