MELBOURNE - Oil prices climbed on Friday, heading for gains of more than 2% for the week, on increasing signs of tight supply over the next few months as rocketing gas and coal prices stoke a switch to oil products.
U.S. West Texas Intermediate WTI crude futures rose 30 cents, or 0.4%, to $81.61 a barrel at 0156 GMT, adding an 87 cent premium on Thursday. The contract was heading for a 3% gain on the week.
Brent crude futures rose 28 cents, or 0.3% to $84.28 a barrel, after picking up 82 Cents in the previous session, leaving the contract set for a 2.3% increase for the week.
Analysts pointed to a sharp drop in OECD oil stockpiles to their lowest level since 2015. Demand has picked up with recovery from the COVID-19 pandemic, with a further boost coming from industry turn away from expensive gas and coal to fuel oil and diesel for power.
This energy crisis, particularly coal and gas, has really benefited the energy complex and oil has pushed up as a result, said Commonwealth Bank commodities analyst Vivek Dhar.
The International Energy Agency said on Thursday the energy crunch is expected to increase oil demand by 500,000 barrels of every day bpd That would result in a supply gap of around 700,000 bpd throughout the end of this year until the Organization of Petroleum Countries and allies, together called OPEC add more supply, as planned in January.
You're looking at a window where things can tighten considerably, but it is going to be very wind-dependent, Dhar said.
RBC Capital Markets analysts said that the global oil market is shaping up for a strong bull cycle, led by supply tightening and demand strengthening at the same time.
We maintain the view that we have held in the oil market all year - that the oil market remains in the early days of a structurally strong multi-year cycle, RBC analyst Michael Tran said in a note.