Oil prices rose on Friday to trade 4% up on the week, buoyed by a global energy crunch that has helped gas prices to record highs and prompted China to demand increased coal production.
Energy markets have tightened in the face of improved fuel demand as economic activity rebounds and coronavirus restrictions ease with further pressure from fears that a cold winter could add to the strain on gas supplies.
China ordered miners in Inner Mongolia to ramp up coal production to help alleviate the country’s energy crunch.
“As other energy prices like natural gas and coal keep pushing higher, upside risks to the oil market have started to build,” said Bank of America’s Christopher Kuplent.
Brent crude futures rose $0.58, or 0.7%, to $82.53 a barrel by 1130 GMT while US West Texas Intermediate (WTI) crude futures rose $0.6, or 0.8%, to $78.90.
Earlier in the week, WTI touched its highest in nearly seven years at $79.78 while Brent hit a three-year high of $83.47.
The price run-up has been spurred by soaring European gas prices, which have encouraged a switch to oil for power generation, and a decision by the Organisation of the Petroleum Exporting Countries (OPEC) and allies led by Russia to stick to plans to add only 400,000 barrels per day (bpd) of supply in November.
Benchmark European gas prices at the Dutch TTF hub on Friday stood at a crude oil equivalent of about $200 a barrel, based on the relative value of the same quantity of energy from each source, according to Reuters’ calculations based on Eikon data.
“An acceleration in gas to oil switching could boost crude oil demand used to generate power this coming northern hemisphere winter,” an ANZ commodities analyst said in a note.
ANZ increased its 2021 fourth-quarter crude oil demand forecast by 450,000 bpd.
The US Department of Energy said that all “tools are always on the table” to tackle tight energy supply conditions, which could include a release of oil stocks.