Oil prices edged higher on Tuesday, climbing after what analysts called a breather after weeks of gains fuelled by a rebound in global demand that is contributing to energy shortages in major economies.
U.S. West Texas Intermediate (WTI) crude futures climbed 67 cents, or 0.83% to $81.20 a barrel, having also gained 1.5% in the previous session, in which it reached the highest in around seven years.
Brent crude was up 26 cents, or 0.31% at $83.95 a barrel, after touching three-year highs on Monday on the way to a 1.5% advance.“There is still plenty of momentum behind the oil rally and the fundamentals remain extremely favourable,” said Craig Erlam, senior market analyst at OANDA. “Will it be a surprise to see oil back in the triple digits later this year? Probably not.”
Power prices have risen to records in recent weeks, driven by energy shortages in Asia, Europe and the United States. Soaring natural gas prices are also encouraging power generators to swap the cleaner-burning fuel for oil.
Switching to oil from natural gas for power production may boost global demand for crude by between 250,000 to 750,000 barrels per day, analysts have estimated.
In China, where major industrial regions are grappling with power shortages, thermal coal futures were on the rise again on Tuesday with prices gaining more than 10%. The government also announced it would fully liberalize the country’s thermal power market.
Higher energy prices are also adding to inflationary pressures in recovering economies. Japan’s wholesale inflation was at a 13-year high in September, data showed on Tuesday.
Qatar, the world’s biggest producer of liquefied natural gas (LNG), on Monday told customers it was unable to help take the spark out of energy prices and supply more fuel to the market.
“We are maxed out, as far as we have given all our customers their due quantities,” said Qatar energy minister Saad al-Kaabi. “I am unhappy about gas prices being high.”