Oil in New York rose to the highest since 2014 as an OPEC+ panel recommended proceeding with gradual supply hikes amid a rapidly tightening market.

Futures jumped as much as 1.8% after the Joint Ministerial Monitoring Committee advised a 400,000-barrel-a-day increase in November, several delegates said. The meeting will be followed by a full ministerial gathering to review the recommendation.

The market has tightened significantly following the economic recovery from the pandemic and supply disruption in the Gulf of Mexico due to Hurricane Ida. Surging natural gas prices have also raised the prospect of increased demand for oil products for power generation and are boosting inflationary pressures on the global economy.

Modeling from the Organization of Petroleum Exporting Countries and its allies shows oil demand will outstrip supply over the next two months. Yet the alliance is unlikely to add more than the planned 400,000 barrels a day of output in November, Amrita Sen, chief oil analyst and co-founder of consultant Energy Aspects, said earlier.

“I’m not saying they won’t add more than 400,000 barrels a day down the line, but for today we think that’s unlikely,” Sen said in an interview with Bloomberg Television. “Saudi Arabia is very, very keen to reduce volatility, both on the upside and the downside. That’s the key. If suddenly prices spiked, then they’ll be very quick to react.”

West Texas Intermediate advanced as much as 1.8% to US$77.26 a barrel, the highest since November 2014. It traded at US$77.10 as of 9:20 a.m. in New York

Brent traded up 1.8% at US$80.72 a barrel

OPEC+ production policy will be the main factor influencing oil prices over the coming months, according to Vitol Group. There’s little chance of Iranian barrels returning this year and U.S. shale producers aren’t investing enough to raise output quickly, Mike Muller, head of Asia for the oil trading house, said Sunday in a webinar hosted by Dubai-based consultant Gulf Intelligence.

Fuel switching due to high coal and gas prices is likely to drive up oil demand by 500,000 barrels a day this winter, Sri Paravaikkarasu, head of Asia oil at consultant FGE, told Bloomberg Television. A cold winter could see consumption climb by a further 200,000 to 300,000 barrels a day, she added.

<i>Photo by Maksym Kaharlytskyi on Unsplash</i>

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