Oil rises for sixth day on supply concerns, Brent rises above $80
Oil markets climbed for the sixth day on Tuesday, reversing previous losses from fears over supply shortages, while rising liquefied natural gas (LNG) and coal prices were also supported.
Brent crude futures rose 55 cents, or 0.7%, to $80.08 a barrel at 0510 GMT, after hitting their highest level since October 2018 at $80.35 at the start of the session. It rose 1.8 percent on Monday.
West Texas Intermediate (WTI) crude futures rose 57 cents, or 0.8%, to $76.02 a barrel, reaching its highest level since July 6. It rose 2% the previous day.
Oil continues to rise amid supply disruptions from hurricanes in the US, the relaxation of global lockdown measures, and the spread of the COVID-19 vaccine at a time of rising demand.
Due to the lack of investment in oil and gas resources, market interest is shifting to cleaner fuels.
Price volatility is likely to increase in the next decade as demand for conventional energy sources increases. The increase in demand raises the possibility of potential higher price cycles for traditional forms of energy.
While this may be beneficial for oil producers in the short run, it also means significant long-term costs to the global economy that are not in anyone's interest.
It is clear that underinvestment in the global oil and gas sector will lead to a contraction in supply at a time when demand is poised to recover. Supply problems arise as countries ease COVID-19 restrictions on movement, potentially increasing demand.
Gas prices in Europe and Asia are near record highs, while prices in the United States are at a seven-year high. Coal prices are at record highs and Brent has reached its highest level since 2018, surpassing $80 a barrel.
Global energy investment saw its biggest decline in 2020, when the COVID-19 pandemic beat demand and pressure for the energy transition to meet greener targets drew more funds to renewables.
While the Organization of the Petroleum Exporting Countries (OPEC) and its allies still have a cap on oil production, a lack of investment is limiting the output of the group's two largest African producers.
Nigeria and Angola, Africa's leading oil exporters, are struggling to increase production to their quotas set by the Organization of the Petroleum Exporting Countries (OPEC), as inadequate investment and maintenance issues continue to hamper production.
Meanwhile, investment in the U.S. sector has accelerated, and unless the U.S. and Iran get a quick rapprochement, these two countries could challenge their supplies next year.
A lot of uncertainty about what the energy transition will be makes the situation worse, so there will be a wait-and-see attitude in terms of entering new types of investments in the energy transition. However, it will likely take a long time for new energy sources to meet global demand.
Japan, the world's fifth-largest oil user, plans to lift the coronavirus state of emergency in all regions on Thursday as the number of new cases falls and the pressure on the medical system eases.
Some executives say they expect global oil demand to reach pre-pandemic levels early next year, in line with OPEC's bullish forecast.
According to some, reaching the aforementioned demand amounts is now much further away than many experts think, depending on where the climate-energy transition is headed.
Oil demand could increase by as much as 0.5 million barrels per day, or 0.5% of global oil supply, as higher gas prices force a shift from gas to oil consumption.
If the Northern Hemisphere winter turns colder than expected, rising energy prices is inevitable.
China is in the grip of a power crisis as coal supply shortages, stringent emissions standards and strong industry demand push coal prices to record levels and trigger widespread restrictions on use.
The International Energy Agency (IEA) has also called on investors to stop funding new fossil fuel projects to achieve net zero emissions, despite disagreements over oil demand forecasts.
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