Oil prices rose on Monday as Opec+ stuck to its plan to increase production by 400,000 barrels per day of supply for November.
The alliance, led by Saudi Arabia and Russia, plans to bring 2 million bpd back to the markets by the end of the year, as it gradually unwinds a historic production agreement.
Brent, the international benchmark for more than half of the world's crude, rose 2.91 per cent to $81.59 per barrel at 6.55pm UAE time. West Texas Intermediate, the key gauge for US oil, jumped 2.71 per cent to $77.94 per barrel.
Oil prices are trading higher as demand outstrips supply owing to a surge in gas prices along with a quicker-than-expected economic recovery in developed countries. The rise in natural gas prices as winter approaches has raised the prospect of higher volumes of oil products being consumed in power generation, boosting overall demand.
“Unless a shock in demand, crude oil prices should remain firm going into the winter, at least a lot of indicators are flashing green,” said Malik Zetchi, financial analyst, energy, metals and mining at Pictet Wealth Management.
He also said shale oil suppliers in the US have “no more ambitions to grow volumes like in the past as capital discipline and shareholder returns are now two principles anchored in their strategies.
“Given investors' positive response to this shift, we expect US shale oil producers to maintain a strong discipline.”
Opec also remains largely bullish on oil demand, with its latest forecast expecting consumption to exceed pre-pandemic levels by 2022. The group expects global oil demand to reach 100.8 million bpd next year, according to its monthly oil market report for September.
Opec revised upwards its estimated demand growth for 2022, by 900,000 bpd to 4.2 million bpd amid expectations of higher levels of economic activity and fewer movement restrictions.
The global economy is forecast to grow 6 per cent this year, according to the International Monetary Fund's last World Economic Outlook update in July.
Crude is also expected to remain the biggest component of the international energy mix until 2045, as the world's population increases and the global economy more than doubles in size to $270 trillion, Opec said in its World Oil Outlook 2021 report last week.
“The indications are that the gas market is likely to remain in deficit during the winter season, which in turn potentially further increases demand for crude oil,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, said in a note.
Separately on Monday, the chief executive of Aramco, the world's biggest crude exporter, said demand for oil is rising amid tighter natural gas supplies globally as well as due to a fall in surplus oil inventories.
“There is some shift that we have seen from gas to liquids, especially in certain markets in Asia, and that impacts oil demand by additional almost half a million barrels," Amin Nasser told the Energy Intelligence Forum.
"The surplus inventories are behind us right now, down more than 10 per cent from the five-year average so overall the demand is very healthy,” he added.
Aramco also plans to boost its production capacity to 13 million barrels per day by 2027, from 12 million currently.
The state-owned oil company seeks to expand capacity from new and existing fields, Mr Nasser said. The capacity expansion will also be done in phases, he added.