Crude jumps to multi-year highs on global energy crunch
Oil prices rose more than 2% on Monday, extending gains as an energy crisis gripping major economies shows no sign of easing amid a pick up in economic activity and restrained supplies from major producers.
Brent crude was up $1.70, or 2.1%, at $84.09 a barrel by 1100 GMT, its highest since October 2018.
U.S. West Texas Intermediate (WTI) crude rose $2.08, or 2.6%, to $81.43 for its highest since late 2014.
“Oil prices are likely to continue climbing in the short term,” said Commerzbank (DE:CBKG) analyst Carsten Fritsch.
Prices have risen as more vaccinated populations are brought out of coronavirus lockdowns, supporting a revival in economic activity, with Brent advancing for five weeks and U.S. crude for seven.
Coal and gas prices have also surged, making oil more attractive as a fuel for power generation, pushing crude markets higher.
In India, some states are experiencing electricity blackouts because of coal shortages. China’s government, meanwhile, has ordered miners to ramp up coal production as power prices surge.
The energy crisis sweeping the world is raising the prospect of a difficult northern winter as heating demand rises.
“The news from last week that the (U.S.) Department of Energy is not planning to tap into strategic reserves for now is keeping the oil market tight and is supporting prices,” said UBS analyst Giovanni Staunovo.
U.S. Energy Secretary Jennifer Granholm last week said the administration was considering tapping the country’s emergency oil reserves to cool gasoline prices, though the Energy Department later said it had “no plans to take action at this time”.
Drillers in the United States are taking advantage of the increase in prices and added five new oil wells last week for the fifth straight weekly increase in oil and gas rigs.
The Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, last week decided to maintain a steady and gradual increase in output.
“Depleting stocks, OPEC discipline and the ongoing energy crunch will provide solid price support in the next three months,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.