Oil prices reversed early losses to extend gains into a fourth day on Tuesday as global demand rebounded, leading to energy shortages insignificant nations.
Brent crude was up 21 cents, or 0.3 percent, at $83.86 per barrel at 0632 GMT, the highest in three years, after jumping 1.5 percent the day before.
Oil in the United States rose 13 cents, or 0.2 percent, to $80.65 per barrel, a seven-year high, after rising 1.5 percent the previous session.
According to James Whistler, global head of energy derivatives at SSY in Singapore, crude oil is getting “caught up in the broader rally across the energy industry.” Rising gas and coal prices raise the likelihood of increased reliance on oil for power generation. Analysts anticipate that switching from natural gas to oil for electricity generation will increase global demand for petroleum by 250,000 to 750,000 barrels per day.
Power costs have reached all-time highs in recent weeks, owing to energy shortages in Asia, Europe, and the United States.
In China, where central industrial districts are experiencing power outages, the government said it would fully liberalize its thermal power market on Tuesday.
The triple digits?
Thermal coal futures were also on the increase, with prices in China increasing by more than 10%.
Higher energy prices exacerbate inflationary pressures in recovering economies. Japan’s wholesale inflation reached a 13-year high. There is still a lot of momentum behind the oil move, and the fundamentals are still quite favorable,” said Craig Erlam, senior market analyst at OANDA. Will it come as a surprise if oil returns to the triple digits later this year? Most likely not.”
Qatar, the world’s largest producer of liquefied natural gas (LNG), informed consumers on Monday that it could not help reduce energy prices and deliver additional fuel to the market.
Gold steadied
Gold prices remained stable as investors considered fears about inflation, spurred by a jump in oil and metal costs that threatened to undermine the economic recovery.
Consumer price index statistics likely reveal that price pressures remained robust last month. While minutes from the Federal Reserve’s September meeting are expected to imply an impending reduction in asset purchases, the latest miss on job statistics may confuse the timing of when tapering could begin.
