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Oil futures rose Tuesday, with the front-month contract for Brent crude trading above $80 a barrel, as supply outages and underlying demand propel prices to three-year highs.
Natural-gas prices also continued to soar to the highest prices in at least seven years.
November Brent crude
BRNX21,
rose 62 cents, or 0.8%, to $80.15 a barrel on ICE Futures Europe. December Brent
BRN00,
BRNZ21,
the most actively traded contract, was up 67 cents, or 0.9%, at $79.41 a barrel.
November West Texas Intermediate crude
CL00,
CLX21,
the U.S. benchmark, rose 75 cents, or 1%, to $76.20 a barrel on the New York Mercantile Exchange.
Concerns about tightening supplies are evident in spreads between nearby and later-dated futures contracts. A growing premium for nearby contracts, known as backwardation, reflects demand for available barrels. The premium for December 2021 Brent crude over the December 2022 contract had risen to as much as $7 a barrel versus $4 in August, noted Warren Patterson, head of commodities strategy at ING, in a note.
“A growing backwardation along the curve reinforces the view of a tightening market,” he said.
Crude has found support, in part, from outages in the Gulf of Mexico. Producers were slow to restore production after Hurricane Ida, which made landfall on the Louisiana coast in late August, damaged offshore platforms and infrastructure.
Meanwhile, reports have indicated that the Organization of the Petroleum Exporting Countries and its allies have struggled to boost production after previously agreeing to relax production curbs in monthly increments beginning in August.
“OPEC+ is under growing pressure therefore to expand its oil supply to a greater extent so as to alleviate the tight supply. One opportunity to do this will come next week when the OPEC+ oil ministers take decisions about future production,” said Carsten Fritsch, analyst at Commerzbank, in a note.
The stakes could prove high, analysts said.
“All eyes are now on OPEC. The cartel will meet next week and the sword hanging over oil prices is whether it will react to the unfolding energy crisis by opening its supply taps even wider,” said Marios Hadjikyriacos, senior investment analyst at XM, in a note.
“If not, panic-buying could kick into higher gear,” the analyst said.
Natural-gas prices, meanwhile, extended a surge, with the November contract
NG00,
NGX21,
jumping 9.5% to $6.276 per million British thermal units on Nymex.
Soaring natural-gas prices in Europe are leading to fears of a broader energy crisis. On Tuesday, Dutch TTF gas futures jumped 11%, while the U.K. natural gas contract
GWMV21,
rose 12%. Meanwhile, rising coal prices have been blamed for factory shutdowns in China.
Read: The surge in European gas prices is tied to the Asian shortfall in coal supply, strategist says
