By Peter Nurse
Investing.com -- Oil prices soared Monday, hitting multi-year highs with the Organization of the Petroleum Exporting Countries and allies seen keeping to its existing plan of a gradual increase in supply, declining to add more output to the global market even under pressure from consumers.
By 8:45 AM ET (1245 GMT), U.S. crude futures were up 1.7% at $77.17 a barrel, climbing to a new seven-year high, while Brent futures were up 1.9% at $80.81 a barrel, surging above $80 again.
U.S. Gasoline RBOB Futures were up 1.4% at $2.2804 a gallon.
Ministers from OPEC, Russia and their allies, a group known as OPEC+, are due to meet online later Monday, with the market eagerly awaiting to see whether they decide to go beyond the existing deal to add 400,000 barrels per day to supply every month until at least April 2022.
The group has been put under pressure from consumers such as the United States and India, the largest and third largest consumers in the world respectively, to help reduce prices by increasing supply to the global market.
“Energy shortages in China and Europe ahead of the winter have led to discussion on increasing crude oil supply by more than the currently agreed monthly increment of 400Mbbls/d - a one-time increment of 600Mbbls/d or even 800Mbbls/d for November remains on the table to fill the supply gap,” said analysts at ING, in a note.
However, Reuters reported earlier Monday that they are likely to stick to the existing deal, something that has become a lot more likely after OPEC's Joint Ministerial Monitoring Committee recommended that the ministers decide against adding more oil to the market.
Crude has posted strong gains this year - both benchmark contracts are up over 50% year to date - and more gains look likely. Demand for coal and natural gas now exceeding pre-Covid-19 highs with oil not far behind, suggesting a transition to clean energy from fossil fuels is proceeding very slowly.
Over three-quarters of global energy demand is still met by fossil fuels with less than a fifth by non-nuclear renewables, according to energy watchdog the International Energy Agency.
Additionally, Friday’s positioning data showed speculators increased their net long positions in ICE (NYSE:ICE) Brent by 9,303 lots over the last reporting week, increasing to levels last seen in March 2021.
“This was the fifth consecutive week of speculative longs build up and reflects optimistic sentiment among money managers due to healthy demand in the physical market,” ING added.