Oil prices continue to rise near 2018 highs on tightening crude markets
(Bloomberg) --Oil held gains near the highest since 2018 amid a global energy crunch that’s set to increase demand for crude, while stockpiles are falling from the U.S. to China.
Futures in London traded above $77 a barrel, heading for a third straight weekly increase. Global onshore crude inventories plunged by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. stocks are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.
China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves, said traders with knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.
Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting that prices could climb even further because of the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas remains elevated for an extended time, according to the Organization of Petroleum Exporting Countries.
“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
- Brent for November settlement rose 0.5% to $77.63 a barrel at 10 a.m. in London
- West Texas Intermediate for the same month added 0.3% at $73.52
Various underlying oil market gauges are also pointing to a stronger market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive on the market outlook.
At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.
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