Oil Extends Gain After Eighth Weekly Advance on Energy Crisis

(Bloomberg) -- Oil rose higher on Monday following an eighth weekly gain, spurred on by the energy crunch as winter approaches.

Futures in New York were above $83 a barrel after adding 3.7% last week, capping the longest run of weekly gains since 2015. A shortage of natural gas is creating extra demand for oil products like fuel oil and diesel from the power generation sector. That’s coincided with key economies rebounding from the pandemic.

Meanwhile, Iran has said that talks about a nuclear deal could last for several more rounds. The OPEC member could increase production by 1.3 million barrels a day if U.S. sanctions were lifted, the International Energy Agency said last week.

West Texas Intermediate was at its strongest in almost seven years earlier on Monday, while Brent, the global benchmark, topped $85 a barrel on Friday for the first time since late 2018. The OPEC+ alliance is still only adding incremental, monthly supplies. Some members are not even expected to meet current output targets. 

“Demand is outstripping supply heading into the winter months, and this should safeguard upward pressure on oil prices,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates. 

The energy crisis has contributed to China’s economy weakening in the third quarter, as electricity shortages in September forced factories to curb output or shut completely. The power outages also impacted crude processing last month, with refining rates dropping to the lowest level since May 2020.

India’s diesel consumption, meanwhile, is gathering pace with the onset of annual festivals, increasing sales to about pre-virus levels in the first half of October. The battered aviation sector is also poised for a boost, with the U.S. set to open its borders to vaccinated foreigners on Nov. 8.

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