Oct 18, 2021: Oil prices hit their highest level in years on Monday as demand recovers from the pandemic, boosted by more custom from power generators turning away from expensive gas and coal to fuel oil and diesel.
Shortages of natural gas and coal from Asia to Europe are increasing the demand for oil products in power generation. That has come along with key economies recovering from the pandemic, which has significantly tightened the market.
Brent crude oil futures rose 90 cents, or 1.1 percent, to $85.76 a barrel at 5.45 GMT, the highest level since October 2018, after reaching a session high of $86.04, highest since October 2018.
US West Texas Intermediate (WTI) crude futures rose $1.23, or 1.5 percent, to $83.51 a barrel, the highest since October 2014, reaching a high of $83.73. Both contracts rose at least 3% last week.
“Relaxation of sanctions around the world could help restore fuel consumption,” ANZ Bank analysts said in a note on Monday.
The note also pointed to the gas-to-oil switching for power generation which alone could boost demand by as much as 450,000 barrels per day in the fourth quarter.
Cold temperatures in the northern hemisphere are expected to worsen the oil supply deficit, according to Edward Moya, a senior OANDA analyst.
Japanese Prime Minister Fumio Kishida said on Monday that the country will urge oil producers to increase output and take steps to cushion the blow to industries hit by the recent spike in energy costs.
Still, supply could increase from the United States, where energy firms last week added oil and natural gas rigs for a sixth week in a row as soaring crude prices prompted drillers to return to the well pad.
The US oil and gas rig count, an early indicator of future output, rose 10 to 543 in the week to October 15, its highest since April 2020, energy services firm Baker Hughes Co said last week.
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