Oil prices extended pre-weekend gains on Monday to hit multi-year highs, lifted by tight global supply and strengthening fuel demand in the United States and beyond as economies recover from pandemic-induced slumps.
Brent crude futures rose by $0.97, or 1.1%, to $86.50 a barrel by 1225 GMT, the highest since October 2018.
US West Texas Intermediate (WTI) crude futures rose $1.29, or 1.5%, to $85.05 and reached their highest level since October 2014.
Both benchmarks closed last week with slight gains despite rising coronavirus cases in the United Kingdom and Eastern Europe, signalling a potentially difficult winter ahead.
“It seems that continuous global stock drawdowns are still widely anticipated in coming months and only a dent in demand growth could change the underlying sentiment,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Goldman Sachs said a strong rebound in global oil demand could push Brent crude prices above its year-end forecast of $90 a barrel. The bank estimated gas-to-oil switching could contribute at least 1 million barrels per day (bpd) to oil demand.
After more than a year of depressed fuel demand, gasoline and distillate consumption is back in line with five-year averages in the United States, the world’s largest fuel consumer.
Meanwhile, US energy companies last week cut oil and natural gas rigs for the first time in seven weeks even as oil prices rose, energy services firm Baker Hughes Co said on Friday.
Money managers raised their net long US crude futures and options positions in the week to October 19, the US Commodity Futures Trading Commission (CFTC) said on Friday, underlining strong market sentiment.
Oil prices have also been bolstered by worries over coal and gas shortages in China, India and Europe, which spurred fuel switching to diesel and fuel oil for power.