(Bloomberg) — Crude topped $81 a barrel as the global power crunch boosts demand for oil ahead of winter.
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West Texas Intermediate futures climbed 2.7% to the highest level since October 2014. The prices of fuels such as coal and natural gas are soaring in Europe and Asia as stockpiles run low before the Northern Hemisphere winter, prompting a switch to oil products such as diesel and kerosene.
The oil market’s structure has also rocketed in recent days, a sign of the growing bullish sentiment among traders. The difference between the nearest two December WTI contracts — known in industry jargon as the Dec.-Red-Dec. spread — topped $8 a barrel on Monday, its widest since 2014.
The American crude benchmark has risen about 30% since mid-August as the energy crisis has intensified. Saudi Aramco estimates the gas shortage has already increased oil demand by around 500,000 barrels a day, while Goldman Sachs Group Inc. sees consumption climbing even higher. The gas-to-oil switch is also evident in increasing profits from diesel and fuel oil production for refiners in Europe.
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“Refinery margins are now suddenly healthy again,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “That is real demand for crude oil kicking in.”
Still, there’s a possibility that signs of slowing global growth — partly because of soaring energy prices — will ease some of the demand pressure on crude. Goldman cut its forecasts for U.S. expansion this year and next, blaming a delayed recovery in consumer spending. The energy crises in China and India may also lead to a slowdown in Asia.
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