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Shortages of natural gas and coal from Asia to Europe are driving additional demand for petroleum products for power generation.
As demand recovers from the COVID-19 pandemic, Monday oil prices hit their highest levels in years, thanks to more customization of generators from expensive natural gas and coal to fuel oil and diesel.
Shortages of natural gas and coal from Asia to Europe are driving additional demand for petroleum products for power generation. It coincided that the major economies rebounded from the pandemic, leading to a sharp tightening of the market.
0445 GMT Brent crude oil futures rose 90 cents, or 1.1%, to $85.76 per barrel, after hitting an intraday high of $86.04, the highest price since October 2018.
US West Texas Intermediate (WTI) crude oil futures rose 1.23 US dollars, or 1.5%, to 83.51 US dollars per barrel, hitting an intraday high of 83.73 US dollars since October 2014.
Both contracts rose at least 3% last week.
ANZ Bank analysts said in a report on Monday: “Global relaxation of restrictions may help the recovery of fuel consumption,” adding that the conversion of natural gas for power generation alone could increase demand by as much as 450,000 barrels/ bucket. A day in the fourth quarter.
Edward Moya, senior analyst at OANDA, said that cold temperatures in the northern hemisphere are expected to also exacerbate oil supply shortages.
He said: “As the weather in the north has started to get colder, the energy contraction will intensify and the oil market deficit seems to get worse.”
He added: “The additional demand for crude oil due to coal, electricity and natural gas shortages does not seem to be accompanied by a large increase in OPEC+ or the United States.”
Japanese Prime Minister Fumio Kishida said on Monday that the country will urge oil producers to increase production and take measures to alleviate the impact of the recent surge in energy costs on the industry.
Nonetheless, supplies from the United States may increase, and energy companies added oil and gas rigs for the sixth consecutive week last week, as the soaring crude oil price prompted drillers to return to the well site.
Energy services company Baker Hughes Co said last week that as of the week of October 15, the number of oil and gas rigs in the United States increased by 10 to 543, the highest level since April 2020.
At the same time, China’s economy may grow at the slowest rate in a year in the third quarter, affected by the power shortage in September, forcing factories to control production or shut down completely.
The world’s second-largest oil consumer’s daily crude oil processing rate in September fell to the lowest level since May 2020. The reason was that raw material shortages and environmental inspections paralyzed refinery operations, while independent refineries faced tightening of crude oil import quotas.
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