Oil prices experienced a hike again on Monday, continuing multiweek gains owing to the energy crisis faced by major economies. As major producers show supply restraint, the energy crisis does not seem to be going anywhere.
Brent crude surged to $1.20 cents, or 1.5%, as it touched $83.59 a barrel by 0414 GMT, following its gains of around 4% last week. US oil rose by $1.51, or 1.9%, hitting $80.86 a barrel. The price of US oil has not been this high since late 2014. US crude went up by 4.6% through Friday.
Prices have soared as the economic activity resumes owing to increased vaccination rates amongst the population. Brent advanced for five consecutive weeks while US crude advanced for seven.
Coal and gas prices are also increasing as economies recover, leading to oil becoming a more attractive choice of fuel for electricity generation resulting in crude markets soaring further.
A commodities analyst at CMC Markets in Singapore Kelvin Wong said, “There’s no direct news flow, the moves are momentum-driven where Intermarket factors implying higher expected inflation are supporting the bullish move in oil prices.”
A number of states in India are experiencing blackouts and increasing power cuts owing to coal shortages. The Chinese government has instructed coal miners to ramp up production in the wake of rising power prices.
The energy crisis gripping world economies is leading to fears of a harsh winter as the demand for heating will rise.
Fund managers amplified their net long positions during the week to Oct 5, in US crude futures and options, as per the Commodity Futures Trading Commission on Friday.
The commission added that the speculator group has increased the combined futures and options position in London and New York by 8,902 contracts to 325,578 during the period.
Drillers in the US are benefiting from the rising prices consequently adding five new oil wells last week. This marks the fifth consecutive weekly increase in gas and oil rigs.
The Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, last week made the decision to maintain a steady and measured increase in production.
