Oil’s bullish trend on Friday spread to Monday as the U.S. benchmark price hit $81 and traded barely under $82 a barrel. The energy crisis in both Europe and Asia is triggering the alarms ahead of the winter period, with supply at a low.
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As reported by Oil Price, the front-month WTI Crude contract traded on Monday at $81.75, up by 3%. “The international benchmark, Brent Crude, was up 2.35% at $84.34.”
“Oil extended the rally from last week, which saw the U.S. benchmark topping the $80 per barrel for the first time since 2014.”
Floods and landslides caused by heavy rain in China forced 60 coal mines to shut down in the country’s top coal-producing region, hence worsening the coal and power crisis in the Asian giant. Coal futures closed at a new record high on Monday.
Chinese coal production has been grappling with weather issues at a point where the country faces a critical shortage of coal supply. The ensuing power crisis is threatening to slow economic recovery.
Oil Price reports that natural gas prices in Europe went up on Monday, “after the softness seen at the end of last week, following forecasts of colder weather. Gas prices in the UK and at the Dutch TTF hub, the European gas price benchmark, were off the record highs from last week.”
Still, according to the latest data by Gas Infrastructure Europe (GIE), gas storage sites in the continent are at 76% capacity at present, way below a five-year average of almost 91%.
“The tighter coal and natural gas markets globally raise the outlook for gas-to-oil switch, which is set to boost oil demand.”
On a note on Monday, Saxo Bank’s strategy team asserted that crude oil “started the week on a strong footing as the global power crunch continues to raise expectations for higher gas-to-oil switching demand at a time where OPEC+ maintains its modest pace of oil monthly oil production increases.”
“With WTI already trading at a seven-year high, Brent may now target the 2018 high at $86.74.”