NEW YORK (BLOOMBERG) – Global oil benchmark Brent has closed above US$85 a barrel for the first time since October 2018, amid a stronger equity market and ongoing concerns around a worldwide energy crisis.
Brent crude futures eked out a 0.9 per cent gain on Tuesday (Oct 19) after a choppy session, while the US benchmark crude closed at a fresh seven-year high.
Meanwhile, Russia signalled that it will not go out of its way to offer European consumers extra gas to ease supply tightness unless it gets approval for a controversial pipeline.
“Crude price volatility is here to stay as demand uncertainty remains elevated over the short term,” said Mr Ed Moya, senior market analyst at Oanda Corp. “There is a lot of noise in all this morning’s headlines, but given the relentless winning streak, oil prices are ripe for significant rounds of profit-taking.”
Crude has advanced for the past eight weeks as the energy crisis – prompted by shortages of natural gas and coal – coincided with a rebound in demand from key economies emerging from the pandemic. Russia indicated that it is keeping a tight grip on gas supplies to Europe, and the Organisation of Petroleum Exporting Countries and its allies have not pumped enough crude to meet production targets, exacerbating a tight supply situation.
It is possible that oil will hit US$100 a barrel this winter, according to commodities trader Mercuria Energy Group.
In exchange for upping supplies, Russia wants to get German and European Union approval to begin using the Nord Stream 2 pipeline to Europe, according to people close to state-run gas giant Gazprom PJSC and the Kremlin. Gazprom’s gas exports to its main markets fell in the first two weeks of October to the lowest since at least 2014.
Technical indicators are showing that crude is in overbought territory. West Texas Intermediate’s 14-day Relative Strength Index is holding above 70, signalling oil may be due for a pullback.
Meanwhile, in the United States, analysts surveyed by Bloomberg estimate a crude stockpile gain of 2.25 million barrels last week. The industry-funded American Petroleum Institute will release inventory data later on Tuesday, while the US government will release its weekly tally on Wednesday.
