By Peter Nurse
Investing.com -- Oil prices traded higher Monday on signs of strong demand even as China released fuel reserves and ahead of this week’s meeting of top producers to discuss supply.
By 8:30 AM ET (1330 GMT), U.S. crude futures were up 1.4% at $84.75 a barrel, while Brent futures climbed 1.4% at $84.91 a barrel.
U.S. Gasoline RBOB Futures were up 1.3% at $2.4015 a gallon.
Oil prices surged to multi-year highs last week, helped by post-pandemic demand rebounding around the globe. This continued Monday as data showed that diesel consumption in India, the third largest energy consumer in the world, rose above pre-Covid levels for the first time in a year. This was helped by increased industrial activity ahead of the festival season.
"We estimate that oil demand is nearing 100 million b/d, its pre-COVID level, with winter seasonality and the recovery in international jet demand set to bring demand to record highs by early next year," said analysts at Goldman Sachs (NYSE:GS), in a note.
This news helped overturn the earlier negative sentiment caused by a rare official statement from the Chinese government confirming that it had released gasoline and diesel reserves to increase market supply and support price stability in some regions.
Attention now turns to Thursday’s meeting of the Organization of the Petroleum Exporting Countries and their allies including Russia, a group called OPEC+, to discuss future supply levels.
These top producers are widely expected to stick to their plan to add 400,000 barrels per day of supply in December, although they are under increasing pressure from consuming countries to increase output by more significant amounts to reduce prices.
For example, U.S. President Joe Biden on Saturday urged major G20 energy producing countries with spare capacity to boost production to ensure a stronger global economic recovery.
“Other than the potential for the market returning to surplus next year, the other factor holding back the group is the uncertainty over if and when Iranian supply could return to the market,” said analysts at ING, in a note. “Iran nuclear talks are set to resume this month and the group would not want to increase output if there is the potential for higher Iranian flows.”
Adding to the positive tone Monday was the failure of the leaders of the Group of 20 major economies to agree to any concrete action over the weekend to limit global warming, making it tricky for the broader United Nations COP26 climate summit in Scotland to come to a meaningful conclusion.