Oil prices gained in October despite losing some steam in the past week, amid a global energy crunch and rising demand due to a faster-than-expected recovery in developed economies.
Brent, the international benchmark under which two-thirds of global oil trades, gained 7 per cent in October from the previous month, closing at $83.72 at the end of trading on Friday. West Texas Intermediate, which tracks US crude grades, gained about 11.4 per cent in the month to settle at $83.57.
"Despite early dip-buying, crude prices could still face a deeper correction after such a prolonged and substantial rally over the last couple of months," said Craig Erlam, senior market analyst, UK and EMEA at Oanda.
Oil prices were weighed down by the prospect of Iranian barrels returning to the markets after talks with Tehran, which are scheduled to resume next month.
Although an agreement with Iran is unlikely to materialise soon, the long-term outlook for Iranian supply is brighter than before.
"That said, it's come at a good time just as the rally was looking very overcrowded, so it may aid the correction," Mr Erlam said.
Oil price fundamentals are solid, with oil trading at multi-year highs amid a global squeeze in supply, as economies rapidly accelerate growth.
Natural gas prices, which are linked to crude, have also doubled so far this year. Henry Hub prices were, however, down 3.93 per cent at $5.555 per million British thermal units at 5.30pm UAE time.
Analysts including prominent New York University economist Nouriel Roubini expect oil prices to touch $100 per barrel by the end of this year because of a lack of investment in the energy sector as the world focuses on transitioning to clean energy in an attempt to cut emissions.
Global shortages of natural gas are leading to an increased demand for crude and are placing more pressure on strained oil supplies, the Paris-based International Energy Agency said in October. This, in turn, is helping to feed rising inflation and slow the world's recovery from the Covid-19 pandemic.
The agency expects demand to rise by 500,000 barrels per day as a result of the current crisis in the energy markets.
Oil producers such as Saudi Arabia, the world's biggest exporter of crude, blamed higher prices for limited investments in the hydrocarbons and infrastructure sector, as well as low inventories.
Opec+, the international bloc of oil-producing nations, including Russia, will meet on November 4 to potentially bring higher supplies to the market.
The group is currently on track to add two million bpd back to the markets by the end of the year in monthly increments of 400,000 bpd.