As of 8:21am EDT on Monday, the front-month WTI Crude contract traded at $81.75, up by 3.00%. The international benchmark, Brent Crude, was up 2.35% at $84.34.
Oil extended the rally from last week, which saw the US benchmark topping the $80 per barrel for the first time since 2014.
China’s coal and power crisis worsened over the weekend, with coal futures in China closing at a new record high on Monday after sixty coal mines in the country’s top coal-producing region were forced to shut amid heavy rain, flooding, and landslides. The weather-related setbacks for Chinese coal production come at a time when the world’s second-largest economy is grappling with a shortage of coal supply and a power crisis, which threaten to slow economic growth.
Europe’s natural gas prices rose on Monday, after the softness seen at the end of last week, following forecasts of colder weather. Gas prices in the UK and at the Dutch TTF hub, the European gas price benchmark, were off the record highs from last week. Yet, the latest data from Gas Infrastructure Europe (GIE), cited by ING, shows that gas storage sites across Europe are just over 76% full at the moment, compared to a five-year average of nearly 91%.
The tighter coal and natural gas markets globally raise the outlook for gas-to-oil switch, which is set to boost oil demand.
Crude oil “started the week on a strong footing as the global power crunch continues to raise expectations for higher gas-to-oil switching demand at a time where OPEC+ maintains its modest pace of oil monthly oil production increases,” Saxo Bank’s strategy team said in note on Monday.
“With WTI already trading at seven-year high, Brent may now target the 2018 high at $86.74,” the bank’s analysts added.
This article was originally published on Oilprice.com