Crude oil extends gains amid bullish fundamentals, Brent nears $80/b

Crude oil futures were higher in mid-morning trade in Asia Sept. 28 amid bullish fundamentals and supply restrictions.

At 10:20 am Singapore time (0220 GMT), the ICE November Brent futures contract was up 22 cents/b (0.28%) from the previous close at $79.75/b, while the NYMEX November light sweet crude contract was 25 cents/b (0.33%) higher at $75.70/b.

"The catalyst driving oil prices strength continues to be the bullish demand outlook and near-term constrained supply, leading to a greater-than-expected drawdowns in crude inventories over the past two weeks," IG Market Strategist, Yeap Jun Rong told S&P Global Platts on Sept 28.

Brent prices have also seen to be surging towards the $80/b mark. ING research analysts have said in a research note on Sept. 28 that given the strength across the energy complex, it is probably only a matter of time before Brent finally breaches $80/b.

The last time front-month ICE Brent crossed $80/b intraday was on Oct. 23, 2018, and Brent last settled above that level on Oct. 17, 2018.

Sharing similar sentiment, several analysts have also noted that the global energy crisis could see demand for crude increase if the northern hemisphere experiences a cold winter, with many countries not equipped to cope.

The record level of natural gas prices and insufficient gas reserves in Europe have offered a significant boost on the demand side, leaving oil as a potentially attractive alternative.

"Natural-gas futures rallied back to levels not seen since February 2014 on Sept. 27 on signs that supply is rapidly tightening amid a global energy crunch with UK and China in the news as gas stations across London turned customers away due to no supplies," said UOB market research on Sept. 28.

Amid the bullish demand outlook, restrictions on the supply side is also providing additional support to the oil complex.

Global supply outlooks have come under pressure as extended production outages in the US Gulf of Mexico have sent US crude inventories sharply lower in recent weeks.

Inventory withdrawals have also been strong across the US, with oil inventories falling to a three-year low of 414,000 barrels. Fuel shortages are widening, putting upward pressure on oil prices, added ANZ research analysts.

Meanwhile, all eyes will be on the upcoming OPEC+ meeting, which is scheduled on Oct. 4 to discuss about the strength in energy markets.

ING research analysts said that the scale of the deficit for the remainder of the year means that the market can absorb more than the currently planned 400,000 b/d increase per month, however, added that the group will also want to ensure that the market continues to draw inventories.