Price of Brent oil rose over $85 a barrel, its highest level since 2018, as investors concern that a shortfall of supply will further increase oil demand after industries started favoring oil use in power production over natural gas.
International benchmark Brent briefly hit $85.09 a barrel at 13.30 GMT for a 1.29% increase compared to the previous session. This was its highest level since Oct. 2018 when it traded at $85.45 a barrel. Brent eased down and traded at $84.78 a barrel at 14.47 GMT.
American benchmark West Texas Intermediate (WTI) crude traded at $82.22 a barrel at the same time for a 1.11% gain after ending the previous session at $81.31 a barrel.
After oil consumption increased as the world economies recovered from COVID-19 pandemic, the energy markets were hit by a supply deficit problem.
The concerns that demand will further outstrip supply as the rising natural gas prices encourage the use of relatively cheaper oil in electricity generation, is now enhancing the upward movement of prices.
International Energy Agency (EIA) stressed in its latest monthly oil market report that such incremental demand from fuel switching from gas to oil is a powerful booster for prices, as it might further tighten the oil market.
It predicted that the ongoing switch-to-oil trend could boost demand by 500,000 bpd compared with normal conditions.
Also, gasoline inventories in the US declined by 2 million barrels to 223.1 million barrels during the week ending Oct. 8, according to the latest data released by the Energy Information Administration, signaling a recovery in demand for refined products.
By Sibel Morrow