Brent Crude Hits a 3-Year High as Oil Extends Gains into Sixth Day

Oil markets rose on Tuesday, reversing earlier losses and extending their rally into a sixth session, amid continued concerns over tight supply at a time when demand is picking up with the easing of COVID-19 pandemic restrictions.

Brent crude futures gained 42 cents, or 0.5%, to $79.95 a barrel at 0248 GMT, reaching its highest since October 2018. It surged 1.8% on Monday.

U.S. West Texas Intermediate (WTI) crude futures climbed 41 cents, or 0.5%, to $75.86 a barrel, hitting its highest since July. It jumped 2% the previous day.

oil chart
U.s WTI Performance Chart

“The market sentiment remained strong with tighter supply and recovering demand in many parts of the world,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

The Japanese government will seek advisers’ approval to lift the state of emergency in all regions on Oct. 1 as the number of new coronavirus cases falls and the strain on the medical system eases, Economy Minister Yasutoshi Nishimura said on Tuesday.

Meanwhile, top African oil exporters Nigeria and Angola will struggle to boost output to their OPEC quota levels until at least next year as underinvestment and nagging maintenance problems continue to hobble output, sources at their respective oil firms warn.

Their battle mirrors that of several other members of the OPEC+ group who curbed production in the past year to support prices when COVID-19 hit demand, but are now failing to ramp up output to meet soaring global fuel needs as economies recover.

Boosting investors’ risk appetite, Goldman Sachs raised by $10 its year-end forecast for Brent crude to $90 per barrel. Global supplies have tightened due to the fast recovery of fuel demand from the outbreak of the Delta variant of the coronavirus and Hurricane Ida’s hit to U.S. production.

Analysts say climbing prices of spot liquefied natural gas (LNG) and coal may also bolster oil prices further.

“Oil demand could pick up by an additional 0.5 million barrels per day, or 0.5% of global oil supply, as high gas prices force a switch from gas to oil consumption. That is set to tighten oil markets further, especially with supply additions from OPEC+ remaining quite conservative. Energy prices could still rally from here if the winter period in the northern hemisphere proved colder than expected.”  Commonwealth Bank commodities analyst Vivek Dhar said in a note.

China is in the grip of a power crunch as a shortage of coal supplies, tougher emissions standards and strong demand from manufacturers and industry have pushed coal prices to record highs and triggered widespread curbs on usage.

China should work to import more coal from Russia, Indonesia and Mongolia in order to resolve supply shortages now crippling large sections of industry, said Han Jun, governor of the northeastern province of Jilin, one of the worst-hit regions

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