Oil rose towards $84 a barrel on Tuesday, within sight of a three-year high, supported by a rebound in global demand that is contributing to energy shortages in big economies such as China.
With demand growing as economies recover from pandemic lows, the Organization of the Petroleum Exporting Countries and allied producers, or OPEC+, is sticking to plans to gradually bring back output, rather than quickly boost supply.
“OPEC+ will push ahead with its cautious approach to supply in the year-end period. Set against this backdrop, oil bears will remain in hibernation mode,” said Stephen Brennock of oil broker PVM.
Brent crude was up 24 cents or 0.3% at $83.89 a barrel at 0810 GMT. On Monday it reached $84.60, the highest since October 2018. U.S. oil gained 21 cents or 0.3% to $80.73 and on Monday hit $82.18, the highest since late 2014.
Jeffrey Halley, analyst at brokerage OANDA, said the lack of much change rise in prices on Tuesday may be due to the market looking overbought based on short-term technical indicators such as the relative strength index.
“It would not surprise me in the least, if we saw a sharp sell-off of $5 to $8 a barrel at some stage this week,” he said.
The price of Brent has surged by over 60% this year. As well as OPEC+ supply restraint, the rally has been spurred by record European gas prices, which have encouraged a switch to oil for power generation.
Power prices have surged to record highs in recent weeks, driven by widespread energy shortages in Asia, Europe and the United States. The energy crisis affecting China is expected to last through to the end of the year.
With prices rising, OPEC+ has come under pressure from consumer nations. A U.S. official on Monday said the White House stands by its calls for oil-producing countries to “do more.”
Source: Reuters (Additional reporting by Aaron Sheldrick; Editing by Louise Heavens)