Oil prices jumped more than 2% on Monday, extending gains as the energy crisis gripping global countries shows few signs of abating amid increased economic activity and limited supply from major suppliers.
Prices have increased as more vaccinated people have been coming out of Coronavirus lockdowns, encouraging a recovery in economic activity, with Brent rising for five weeks and US oil rising for seven. The pace of economic recovery, along with cold weather, has boosted demand for energy, but government pressure to hasten the shift to greener energy has stalled investment in oil projects to expand supply.
World leaders will meet in November in Glasgow for the United Nations Climate Change Conference (COP26) to work on the agenda on energy transformation.
Coal, gas, and electricity prices have also risen to record highs in recent weeks, owing to severe energy shortages in Asia, Europe, and the United States.
Some states in India are suffering power outages due to a scarcity of coal. Meanwhile, the Chinese government has instructed miners to increase coal production as electricity costs rise.
UBS analyst Giovanni Staunovo commented that the announcement from last week that the US Department of Energy does not intend to access strategic reserves is keeping the oil market tight and boosting prices. American drillers took advantage of the price boost last week, adding five new oil wells for the fifth consecutive weekly increase in oil and gas rigs.
Last week, the Organization of Petroleum Exporting Countries (OPEC) and its partners, known as OPEC+, decided to continue a stable and progressive increase in output.
Tamas Varga, an oil analyst at London brokerage PVM Oil Associates remarked that depleting inventories, OPEC discipline, and the continued energy constraint will ensure solid prices in the next three months.
By 11:00 GMT, Brent crude was up $1.70, or 2.1 percent, to $84.09 per barrel, its best since October 2018.
The price of US West Texas Intermediate (WTI) oil climbed $2.08, or 2.6 percent, to $81.43, the highest since late 2014.