Ana sayfa » As some industries switch from high-priced gas to oil supply shrinks and oil rises

As some industries switch from high-priced gas to oil supply shrinks and oil rises

The increase in gas prices and the extent of the fuel transition from gas to oil in consumption are key factors to watch

by BUNKERIST

Oil prices rose on Friday, gaining 4.5% weekly on signs that some industries are starting to switch fuel from high-priced gas to oil and on suspicions that the US government will supply oil from its strategic reserves.

There are many catalysts holding the oil market tight. Fuel demand rises as coronavirus restrictions ease and economic activity recovers, and the approaching winter will further strain gas supplies. However, expectations are high that the supply/demand gap will not change much for the near future.

Brent crude futures rose 93 cents, or 1.1%, to $82.88 a barrel as of 0503 GMT.

West Texas Intermediate (WTI) crude futures rose $1.02, or 1.3%, to $79.32 a barrel.

Earlier in the week, WTI touched a nearly seven-year high of $79.78, while Brent hit a three-year high of $83.47.

Oil prices rose after the U.S. Department of Energy said it “currently” has no plans to tap into U.S. strategic oil reserves to cool the oil price rally.

However, another source said a social media post saying that the department is not “currently” considering tapping into the strategic oil reserve (SPR) is untrue.

Another rise in prices, especially with Brent breaking above the $85/barrel level, could rekindle the debate over whether such a measure should be taken to curb rising energy prices.

Overall, the weekly rally was bolstered by rising gas prices spurring a switch to oil for electricity generation, and the decision taken by the Organization of the Petroleum Exporting Countries and its Russia-led allies to add a supply of just 400,000 bpd in November.

The rise in gas prices and the extent of the fuel-to-oil shift are a key factor to watch now, according to analysts. An acceleration in the gas-to-oil transition could increase demand for crude oil used for power generation in the coming northern hemisphere winter, contributing to the decline of US distillate stocks, which include diesel and heating products.

Meanwhile, a significant shift from gas to oil has not yet been felt in the European energy sector, according to analysts.