Crude oil prices surged to multi-year highs on Monday on increasing signs of robust demand as more utilities turn away from expensive natural gas and coal to oil and diesel for power generation.
At 1250 hours GMT, Brent, the international benchmark for two-thirds of the world’s oil, gained $0.92 (+1.08 percent) to reach $85.78 a barrel, the highest price since October 2018. Similarly, the US West Texas Intermediate (WTI) reached $83.64 a barrel, up by $1.36 (+1.65 percent), its highest since October 2014.
The price for Opec Basket was recorded at $82.50 a barrel with 0.87 percent increase, Arab Light was available at $84.18 a barrel with a 0.87 percent increase, while the price of Russian Sokol jumped to $87.44 after gaining 1.44 percent.
The rally in oil prices reportedly comes as the latest shortages of natural gas and coal spread across Asia and Europe have triggered extra demand for oil products in power generation. Moreover, the world’s major economies began rebounding from the Covid-19 pandemic, creating a buoyant demand that caused a significant tightening of the market.
According to experts, easing restrictions around the world are likely to help the recovery in fuel consumption. They said that the jet fuel market was buoyed by news that the US will open its borders to vaccinated foreign travellers next month. Similar moves in Australia and across Asia followed.
On the other hand, gas-to-oil switching for power generation alone may reportedly boost demand by as much as 450,000 barrels per day in the fourth quarter.
