Crude oil has risen further this week, reaching multi-year high records, as the energy crisis grips major economies and the market still operates with tight supplies. The rising prices of commodities are also a factor.
Firstly, according to Reuters, Brent crude was up $1,45, 1,8% this Monday and settled at $83,84 a barrel. Its highest point since October 2018. While the West Texas Intermediate rose $1,71 or 2,2% and settled at $81,06 to its highest point since late 2014.
As we have reported previously, oil prices have been on a rally for weeks. The global economy has had a revival, as many populations worldwide are already vaccinated, and lockdowns are easing. Mobility restrictions and other measures are ending. Consequently, economic activity boosted.
In addition, the entrance of the wintertime and colder weather are creating a surging demand for energy. However, the energy transition and pressure from governments to accelerate the adoption of cleaner energy sources have slowed down crude oil projects that would have boosted supplies and eased prices.
However, Commerzbank analyst Carsten Fritsch, said quoted by Reuters. “Oil prices are likely to continue climbing in the short term.” Indeed, Brent has risen for the past five weeks and the WTI for seven.
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Crude oil to remain tight in the global market
On the other hand, prices for coal, natural gas, and electricity are also surging to multi-year high records in Asia, Europe, and the United States. Especially natural gas prices have increased to such levels that are almost at the threshold of a crisis.
Moreover, according to Reuters, Qatar told consumers it was powerless to cool energy prices as British steelmakers said they could be forced to halt output in the face of soaring costs. Qatar is the world’s largest LNG seller.
Additionally, in India, there have been some blackouts due to coal shortages. In fact, China’s government has also ordered miners to ramp up coal production as power prices surge.
As for the United States, natural gas nor electricity prices have spiked as much as in Asia or Europe. However, the American market is struggling with increased gasoline prices. Nevertheless, the Department of Energy recently announced it wouldn’t tap into its strategic reserves. Consequently, the market will be operating with tight supplies.
Finally, U.S. Energy Secretary Jennifer Granholm last week said the administration was considering tapping the country’s emergency oil reserves to cool gasoline prices. However, the Energy Department later said it had “no plans to take action at this time.”