Oil rose higher on Monday following an eighth weekly gain, spurred on by the energy crunch as winter approaches in the northern hemisphere. On Tuesday, oil futures rose and were near multi-year highs as an energy supply crunch continued across the globe, while falling temperatures in China revived concerns over whether the world’s biggest energy consumer can meet domestic heating needs.
Oil prices hit their highest level in years on Monday as demand recovers from the COVID-19 pandemic, boosted by more custom from power generators turning away from expensive gas and coal to fuel oil and diesel.
The Brent crude benchmark rose 75 cents to settle at $85.08 per barrel. US West Texas Intermediate (WTI) futures rose 52 cents to settle at $82.96 per barrel. Prices have been climbing the last two months. Since the start of September, Brent has risen by about 19% while WTI has gained around 21%.
Futures in New York were above $83 a barrel after adding 3.7% last week, capping the longest run of weekly gains since 2015. A shortage of natural gas is creating extra demand for oil products like fuel oil and diesel from the power generation sector. That’s coincided with key economies rebounding from the pandemic.
Meanwhile, Iran has said that talks about a nuclear deal could last for several more rounds. The OPEC member could increase production by 1.3 million barrels a day if U.S. sanctions were lifted, the International Energy Agency said last week.
West Texas Intermediate was at its strongest in almost seven years earlier on Monday, while Brent, the global benchmark, topped $85 a barrel on Friday for the first time since late 2018. The OPEC+ alliance is still only adding incremental, monthly supplies. Some members are not even expected to meet current output targets.
Louise Dickson, senior oil markets analyst at Rystad Energy, stated, “Supply-demand balances show that the market is experiencing a supply deficit, which is spurring deep inventory draws and driving prices upwards. This market tightness is expected to extend into most of 2022 and crude oil supply will only catch up with crude demand by the fourth quarter of next year.”
