Oil Prices Rise As Demand Improves Worldwide

Oil prices started the week hitting multi-year highs buoyed by recovering demand and high natural gas and coal prices encouraging users to switch to fuel oil and diesel for power generation, Noah Browning reported for Reuters.

Photo Insert: Cold temperatures in the northern hemisphere are also expected to worsen an oil supply deficit.

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. US 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.

"Easing restrictions around the world are likely to help the recovery in fuel consumption," analysts at ANZ bank said in a note, adding 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.

Cold temperatures in the northern hemisphere are also expected to worsen an oil supply deficit, said Edward Moya, senior analyst at OANDA. "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," he said.

"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 US," he said.

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