Oil up continues multiweek gains
Oil was up in Asia on Monday morning, maintaining its multiweek gains. Significant producer supply constraints collided with rising fuel demand as economies reopened and recovered after COVID-19.
Brent oil futures were up 1.42 percent to $83.56 after gaining nearly 4 percent the previous week. WTI futures rose 1.93 percent to 80.88, the highest level since late 2014. By Friday, US crude had risen 4.6 percent. Both Brent and WTI futures were trading above the $80 level. With other populations emerging from lockdown, like Sydney, Australia, which escaped after 107-day confinement, fuel consumption has grown, driving up costs. Brent futures have increased over the past five weeks, while WTI futures have risen for the past seven.
Although coal and gas prices have risen as the economy recovers from COVID-19, rising crude oil stocks in the United States following recent pulls may influence the black liquid.
We believe crude prices will struggle to rise much higher this quarter and continue to fall gradually next year,” Capital Economics chief commodities analyst Caroline Bain wrote in a note.
According to data issued the previous week by the American Petroleum Institute and the U.S. Energy Information Administration, crude inventories in the United States increased for the second consecutive reporting week. The Organization of Petroleum Exporting Countries and Allies (OPEC+) agreed last week to continue a steady and gradual increase in production.
OPEC’s decision to hold back from a larger-than-expected increase in output is likely to tighten the market more in the fourth quarter,” senior commodity strategist Daniel Hynes said. The market remains strongly bid as demand grows,” he noted.
Despite government efforts to raise coal supply and limit electricity use in a post-pandemic energy crisis affecting numerous countries, China’s largest provincial economy in its northeast rustbelt warned of rising power shortages on Monday.
On Monday, China’s Liaoning province issued its second-highest level power shortage notice, the sixth in two weeks, warning that the shortage might reach roughly five gigatonnes (GW).
Liaoning has the largest GDP and uses the three provinces’ most power that comprises China’s rust-best industrial zone. Since mid-September, it has been experiencing widespread power outages. A level two power shortage alert indicates a demand gap of 10% to 20% of overall power demand.
As coronavirus limitations are relaxed, the recovery in global economic activity has revealed fuel shortages in China and other countries, leaving industry and governments scurrying as the northern hemisphere enters winter.
The most severe power deficit could reach 4.74 gigatonnes (GW) on October 11,” according to an alert published by the Liaoning Provincial Industry and Informatization Department.
In addition, the province issued a level two power crisis advisories for the remaining three days of September. The daily power supply shortfall reached as much as 5.4 GW, knocking off power to hundreds of thousands of homes and forcing industrial operations to shut down.
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