International oil prices moved higher on Thursday as they found support in an upgraded demand outlook from the International Energy Agency (IEA), as heat waves in Europe and a tight natural gas market demand more of the “black gold”. for the production of electricity.
Prices remained high despite a cut in OPEC’s forecasts for demand in 2022, with the cartel of oil-producing countries mainly citing concerns over the coronavirus pandemic, but also geopolitical tensions.
The global benchmark, Brent oil for October deliverygained $2.20 or 2.3% to close at $99.60 a barrel while, on the other side of the Atlantic, the US WTI crude for September deliverygained $2.41, or 2.6%, to settle at $94.34 a barrel.
Heatwaves in Europe and dwindling natural gas supplies due to high fuel prices are boosting demand for oil as power plants seek alternative fuel sources to meet growing demand for electricity, according to the International Energy Agency .
As the IEA notes, the unprecedented high temperatures hitting the continent have put an unexpected strain on electricity networks, increasing demand, while high natural gas prices and limited supplies – following the “brake” on exports from Russia – forcing electricity producers and heavy industry in the region to turn to oil as an alternative fuel source.
The rise in demand for oil comes just as supply and rising prices, which helped fuel inflation, began to show signs of leveling off, as MarketWatch notes.
The EIA notes that this trend will lead to an increase in oil demand by 380,000 barrels per day this year, prompting the Agency to revise upwards its forecast for demand in the whole of 2022.
In particular, the Agency raised their forecasts for total oil demand by 500,000 barrels per day in both 2022 and 2023, to 99.7 million and 101.8 million barrels respectively.
It is worth noting that the price of Brent crude has fallen almost 1% in the last three months, to the level of 97 dollars a barrel, which is the lowest since Russia’s invasion of Ukraine in February.
That decline has made oil a relatively cheap fuel source compared to natural gas, whose prices have soared in Europe as Moscow steadily cuts supplies through the Nord Stream pipeline. In particular, natural gas prices on the continent have jumped almost 120% in the last quarter, climbing to 215 euros per megawatt hour, the highest level since February.
OPEC, for its part, cut its estimated demand to 3.1 million a day from 3.4 million in its earlier forecast.