Oil Up on Global Energy Crunch

Oil extended gains after rallying to a seven-year high as the market continued to tighten amid a global energy crunch.

Futures in New York climbed toward $80 a barrel after jumping almost 6% over the past four sessions. Prices closed at the highest since 2014 on Tuesday as surging natural gas prices spurred greater demand for crude and oil products ahead of winter. At a meeting on Monday, OPEC+ stuck with a gradual increase in supply, despite the worsening energy crisis.

Saudi Aramco, which says the gas crunch is already boosting oil demand, cut prices for all its crudes destined for Asia after the OPEC+ decision. At least four Asian buyers will request full supply of November-loading cargoes, according to people at refineries who asked not to be identified due to the sensitivity of the negotiations. The nominations are due on Wednesday.

The economic recovery from the pandemic along with a supply disruption in the Gulf of Mexico following Hurricane Ida have also contributed to the tightening market. Goldman Sachs Group Inc. predicted an extra 650,000 barrels a day of demand later this year as utilities wrestling with high natural gas prices switch to oil, while spiking coal prices have added to the energy squeeze.

“The tight supply outlook and the extra oil demand coming from countries in Europe and Asia in search of alternative fuels due to the global energy crunch have pumped up prices,” said Kim Kwangrae, senior commodities analyst at Samsung Futures Inc. “Oil at $80 will become a psychological burden for some investors, potentially driving a sell-off if the American government data shows crude inventories have climbed as per expectations.”

The prompt timespread for Brent was 76 cents a barrel in backwardation -- a bullish structure where near-dated contracts are more expensive than later-dated ones. That compares with 78 cents on Monday.

The American Petroleum Institute, meanwhile, reported oil inventories climbed by almost 1 million barrels last week, according to people familiar. If confirmed by government data Wednesday, it would be a second weekly gain. U.S. gasoline stockpiles rose by around 3.7 million barrels, while distillate inventories grew by 345,000 barrels, the API said.