COVID recovery demand and the switch to fuel oil and diesel for power generation encouraged by high natural gas and coal prices have been identified as the factors driving up oil prices which hit multi-year highs on Monday, according to a report by U.S. news agency, Reuters.
“Brent crude oil futures were up 59 cents, or 0.7%, to $85.45 a barrel by 0900 GMT, after hitting $86.04, their highest level since October 2018.
“U.S. West Texas Intermediate (WTI) crude futures climbed 90 cents, or 1.1%, to $83.18 a barrel, after hitting a $83.73, their highest since October 2014.
“Both contracts rose by at least 3% last week,” Reuters reported.
“easing restrictions around the world are likely to help the recovery in fuel consumption,”
Analysts at ANZ bank said in a note that “easing restrictions around the world are likely to help the recovery in fuel consumption” and that gas-to-oil switching for power generation alone could boost demand by as much as 450,000 barrels per day in the fourth quarter.
Edward Moya, senior analyst at OANDA said temperatures in the northern hemisphere are also expected to worsen an oil supply deficit.
“The oil market deficit seems poised to get worse as the energy crunch will intensify as the weather in the north has already started to get colder.
“As coal, electricity, and natural gas shortages lead to additional demand for crude, it appears that won’t be accompanied by significantly extra barrels from OPEC+ or the U.S.,” he added.
Japan would urge oil producers to increase output and take steps to cushion the impact of surging energy costs on industry, according to Prime Minister Fumio Kishida on Monday
Data released by China show third-quarter economic growth fell to its lowest level in a year hurt by power shortages, supply bottlenecks and sporadic COVID-19 outbreaks.
Daily crude processing rate by China in September also fell to its lowest level since May 2020 as a feedstock shortage and environmental inspections crippled operations at refineries, while independent refiners faced tightening crude import quotas.