"La Nina" may aggravate the Asian energy crisis, OPEC+ still has a slim chance to increase production

On Monday (October 25), U.S. oil prices continued to rise, continuing the pre-weekend rally. U.S. crude oil hit a seven-year high. As the economies of various countries recover from the landslide caused by the new crown epidemic and promote strong demand, global supply is still tight. The approach of "La Nina" may further aggravate the Asian energy crisis. The Minister of Energy of Saudi Arabia once again released a conservative stance over the weekend, making the market's prospects for OPEC+ production increase even slimmer.

Saudi Arabia said OPEC+ should maintain a cautious policy on supply

Saudi Energy Minister Abdul Aziz bin Salman said in a television interview over the weekend that oil-producing countries should not take oil price increases for granted. This conservative position has been echoed by Nigeria and Azerbaijan.

Oil prices have more than doubled in the past 12 months, adding to inflation concerns. Despite the surge in demand, OPEC and its allies have shown considerable restraint in increasing production. This boosted Brent oil prices to their highest level since 2018.

Warren Patterson, Head of Commodity Strategy at ING Groep NV, said: “Saudi’s comments reinforce OPEC+’s view that OPEC+ will adhere to a prudent policy. While demand appears to increase, this means that market supply will continue to be tight for the rest of this year.”

"La Nina" is approaching, the cold winter may exacerbate the energy crisis in Asia

La Nina, which usually leads to colder winters, is approaching and is expected to exacerbate the energy crisis in Asia.

The La Niña phenomenon has already appeared in the Pacific. This usually means that the temperature in the northern hemisphere is below normal and prompts regional meteorological agencies to issue warnings about cold winters.

Several countries, especially China, the largest energy consumer, are coping with soaring oil prices, and some countries are facing power shortages or heavy industries facing supply constraints. Coal and natural gas prices are already high, and colder winters will increase heating demand, which may stimulate further price increases.

"We expect the temperature in Northeast Asia to be lower than normal this winter," said Renny Vandewege, vice president of meteorological operations at data provider DTN. "Weather forecast data is a key component of predicting how much energy load is needed."

The National Climate Center expects China to enter La Niña in October. Japan earlier predicted that the probability of La Niña during autumn and winter was 60%.

September crude oil processing at Indian refineries increased due to strong demand

Government data on Friday showed that crude oil production at Indian refineries rose slightly from the previous month in September, as refineries increased their production to meet the surge in demand.

The refinery processed 4.45 million barrels (18.21 million tons) of crude oil per day last month, up from 4.36 million barrels per day in August.

Refinitiv analyst Ehsan Ul Haq said: “The refinery has been increasing production to meet demand during the holiday season. Compared to previous months, as people travel more during the holiday season, demand is expected to increase.”

India's Reliance Industries Ltd is the operator of the world's largest oil refinery. Its oil imports in September increased by nearly 12% compared to August, reaching 1.2 million barrels per day.

As economic activity continues to heat up, India’s fuel consumption climbed in September, but the surge in global oil prices poses a threat to the recovery of the world’s third largest oil importer and consumer.