(Yicai Global) Nov. 7 -- International oil prices have begun to rise again due to the tight supply, but they are expected to greatly fluctuate in the future because of the weak demand, according to analysts.

West Texas Intermediate and Brent crude oil futures jumped 5 percent and 4.1 percent to USD92.61 per barrel and USD98.57 per barrel, respectively, on Nov. 4 after the Organization of Petroleum Exporting Countries cut the output of crude oil by 2 million barrels a day for this month. The most actively traded crude oil futures contracts on the Shanghai International Energy Exchange closed up 2.6 percent at CNY718.1 (USD99.94) on the same day.

The US crude oil inventory dropped by 3.1 million barrels to 436.8 million barrels in the week ended Oct. 28, according to the latest inventory report from the country’s Energy Information Administration. Analysts had predicted a rise of 367,000 barrels.

The US destocked its commercial crude oil last week, causing its crude oil output to drop unexpectedly, Chinese research firm Goldtrust Futures said, adding that the tight supply supported the price of crude oil to surge in the short term.

The INE crude oil futures are an important part of the international crude oil system, and its prices more accurately and rapidly reflect the supply and demand in China, Zhang Hongmin, director of the Commodity Futures Department III at the INE, said at the seminar on global crude oil markets on Nov. 3. The INE crude oil futures have also driven the WTI and Brent crude oil futures in the trading hours in Asia and are not a mirror image of the overseas crude oil futures prices, Zhang added.

International crude oil prices have significantly fluctuated since last month. The WTI crude oil futures soared to a maximum of USD93 per barrel and then fell to around USD84, data from financial information provider DataYes showed. The Brent crude oil futures oscillated between USD90 and USD98.

The global demand for petroleum will reach 103 million barrels a day next year, up 2.7 million buckets a day compared with this year, the OPEC said in a report last week. But the EIA predicted that the demand for crude oil will grow by only 1.5 million buckets a day in 2023.

The OPEC is optimistic in its estimate to enhance market confidence, according to Yang An, head of Haitong Futures’ energy chemical research business. Oil prices face tremendous pressure because the hike in macro interest rates restrains oil prices, and the demand in crude oil-consuming countries is weak, Yang added, noting that the market will take a wait-and-see attitude, so investors should be prudent as there will likely be great fluctuations.

Moreover, the market’s expenditure on traditional energy is significantly declining. “Listed overseas oil and gas firms used most of their cash flows to pay debts and dividends to shareholders in recent years, as they are more willing to optimize their capital structure than raise their production capacity against the backdrop of great fluctuations of oil prices amid the Covid-19 pandemic” Guo Zhaohui, chief analyst of commodities at China International Capital Corporation, said at the seminar.

This is also why the capital expenditure in the crude oil industry decreased and crude oil capacity bottlenecks caused by insufficient capital expenditure cannot be ignored in the long term, Guo added.

But the resumption speed of crude oil production is not limited by low capital expenditure. If a new driving force emerges from the demand side, the supply shortage will likely intensify, and the crude oil prices will further rise, Guo pointed out, adding that no driving force in the demand side has yet emerged.

Editor: Futura Costaglione