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 Organisation of the Petroleum Exporting Countries and allied producers, collectively known as OPEC+, are sticking to plans to restore output gradually rather than boost supply quickly.
“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 $0.02 at $83.67 a barrel by 1215 GMT. On Monday, it reached $84.60, the highest since October 2018.
US oil gained $0.29, or 0.4%, to $80.81, having hit its highest since late 2014 on Monday at $82.18.
Jeffrey Halley, analyst at brokerage Oanda, said the lack of significant change in prices on Tuesday could be because the market looks 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 more than 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.
European gas at the Dutch TTF hub stood on Tuesday at a crude oil equivalent of about $169 a barrel, based on the relative value of the same amount of energy from each source, according to Reuters’ calculations based on Eikon data.
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 US official on Monday said the White House stands by its calls for oil-producing countries to “do more”.