Oil Heading for Seventh Weekly Gain With WTI Nearing $80

(Bloomberg) -- Oil headed for a seventh weekly gain, the longest run since December, as a global energy crunch roils markets from Europe to Asia.

Futures in New York extended gains toward $80 a barrel, a level they haven’t hit since 2014. The U.S. Energy Department said that it had no plans “at this time” to tap the nation’s oil reserves, easing concerns that higher prices could be met with emergency supply.

Crude rallied to the highest since 2014 earlier this week after OPEC+ stuck with plans for a gradual boost in supply next month despite a rapidly tightening market, in part due to the energy crisis. Russia’s offer to ease the gas crunch in Europe and a Financial Times report that the U.S. would consider releasing reserves saw prices tumble more than 3% on Thursday. Crude has since sharply reversed those losses.

The economic recovery from the pandemic along with a supply disruption in the Gulf of Mexico following Hurricane Ida had already tightened the market before rising natural gas prices spurred additional demand for oil products like diesel and fuel oil. The squeeze, which is being exacerbated by higher coal prices, has come ahead of an expected increase in fuel consumption over winter.

“Crude oil prices remain firmly underpinned with current gas prices still well into gas-to-oil switching territory,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “I still wonder how much of the current rally is pure and simple momentum and fear about what lies ahead in the northern hemisphere winter.”

While Russia is offering some form of respite to Europe with increased natural gas flows, China is still facing power outages and Beijing has ordered its state-owned firms to secure energy supplies for winter at all costs. Chinese fuel oil futures jumped almost 10% on Friday as local markets resumed after a week-long national holiday.

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