Oil prices rise on supply concerns as we enter winter

Oil prices edged higher on Monday, shrugging off weaker demand expectations amid growing supply concerns heading into winter.

Brent crude futures settled up $1.16, or 1.3%, at $94.00 a barrel. US West Texas Intermediate crude was up 99 cents, or 1.1%, at $87.78. US emergency oil inventories fell 8.4 million barrels to 434.1 million barrels in the week ended September 9, the lowest level since October 1984, according to data released by the US Department of Energy (DOE) on Monday. US President Joe Biden in March outlined a plan to release 1 million barrels a day for six months from the Strategic Petroleum Reserve to combat high US fuel prices that contribute to rising inflation. Energy Secretary Jennifer Granholm told Reuters last week that the Biden administration is assessing the need for further SPR releases after the current program expires in October. Global oil supplies are expected to tighten further when the European Union's embargo on Russian oil takes effect on December 5. The G7 will impose a price ceiling on Russian oil to punish Moscow for its invasion of Ukraine, limiting the country's oil export revenue while at the same time taking measures to ensure that oil continues to flow to developing countries. But the US Treasury has warned that the cap could push oil and US gasoline prices higher this winter. [nL1N30I0BQ The European Commission, the EU's executive body, will on Wednesday announce a package of measures to help energy companies facing liquidity shortages. France, Britain and Germany said on Saturday they had "serious doubts" about Iran's intention to revive the nuclear deal. Failure to revive the 2015 deal would keep Iranian oil off the market and tighten global supplies. In more bad news for markets, China's oil demand may contract this year for the first time in two decades as Beijing's zero-COVID policy keeps people at home during the holidays and reduces fuel consumption. "The persistence of headwinds from China's renewed virus restrictions and further moderation in global economic activity could still create some reservations about a more prolonged upturn," said Jun Rong Yeap, market strategist at IG. US domestic oil production will also increase in the coming months. Oil production in the Permian Basin in Texas and New Mexico, the largest shale oil basin in the US, will rise by 66,000 barrels per day (bpd) to 5.413 million bpd in October, the US Energy Information Administration (EIA) said in its productivity report on Monday. Meanwhile, the European Central Bank and the US Federal Reserve are poised to raise interest rates further to fight inflation, which could strengthen the US currency and make dollar-denominated oil more expensive for investors. "A strong dollar will act as an inverse correlation for commodities priced in dollars and will likely act as a drag on upside gains in the energy market," said Bob Yawger, director of energy futures at Mizuho. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!