On Tuesday, both US and UK crude oil futures’ prices had spiked to their multi-year peaks after settling the previous session 1.5 per cent higher, reversing earlier losses amid a sharp bounce back in global demands of crude oil in context of a much softer natgas output.
As of early European trading hours, UK crude was trading 0.3 per cent higher to $83.86 per barrel, the highest in more than three years, while US crude rose 0.2 per cent to $80.65 per barrel, the strongest level since 2014.
However, in the day’s rise in crude oil futures’ prices followed a giant leapfrog a session earlier, as both US and UK crude oil futures’ prices gained 1.5 per cent on Monday, mostly catalysed by a steep shortage of power in key oil importers like of China.
Aside from that, the Biden Administration’s wait-and-see policy on increasing crude oil output while remaining largely depended on oil producing nations, added to further strains. Besides, OPEC+ nations had decided against raising outputs earlier this month in a meet of 14-member OPEC alongside its Russia-led allies, spurring up oil prices.
Adding further impetus on crude oil prices, a weaker supply of natgas from Russia galvanized havoc-scale energy crisis across the Europe, as the resource-rich transcontinental nation looks to leverage a soaring crude oil prices in exchange of an ease of sanction on its Nord Stream II pipelines that would bypass Ukraine from its natgas export route to EU nations.
Besides, with an upsurge in natgas prices prompting a number of nations to turn to oil and coal, demands of crude oil had been heightened up further.
Crude oil prices extend rally as global demands soar
Citing statistics, on Monday’s commodity market wind-down, UK crude gained 1.5 per cent to $83.65 a barrel after hitting an intra-session high of $84.60 per barrel, the highest level since October 2018, while US WTI crude oil futures added 1.5 per cent to $80.52 per barrel after breaching $82.18 a barrel earlier in the session, the strongest since late-2014.
Meanwhile, addressing to a drag in crude oil supplies at a time when the global economy has been turbocharged following a pandemic-induced lag later on Q3, 2021, a lead oil analyst at Kpler, Matt Smith, said, “Everything is very much focused on the lack of supply returning at a time when demand appears to be roaring back.
There's the added dimension relating to the potential for fuel switching given global natural gas prices are so high, so it's been a combination of factors here that are just continuing to propel (oil higher)”.
Analysts have been expecting that a mass-scale switch to oil from natgas could fuel up crude oil demands between 250,000 to 750,000 barrels per day over this winter, which would likely to be much colder than recent years, suggested experts.