Oil extends the move as the US benchmark climbs above $ 80 a barrel


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Oil futures surged Tuesday, heading for a fourth straight profit amid signs of inventory scarcity that are causing users to look for crude oil.

West Texas Intermediate Crude Oil for November delivery CL00, + 0.40% CLX21, + 0.40% rose 55 cents, or 0.7%, to $ 81.07 a barrel on the New York Mercantile Exchange. WTI closed above $ 80 on Monday for the first time since October 2014.

December Brent crude oil BRN00, + 0.24% BRNZ21, + 0.24%,
the global benchmark rose 35 cents, or 0.4%, to $ 84 a barrel and was trading near a three-year high.

Analysts said steep backwardation – a condition in which nearby contracts trade at a premium to later-dated contracts – underscores the tight bidding conditions.

The premium between December 2021 CLZ21, + 0.35% and December 2022 CLZ22, + 0.24% crude oil futures reached USD 8.50 on Monday, the highest value since 2014, noted Carsten Fritsch, analyst at Commerzbank, during the difference for Brent, at almost USD 8, reached its highest level since 2013.

“Such high premiums for short-term oil deliveries indicate an acute supply shortage caused by robust demand and limited supply,” wrote Fritsch. “As long as OPEC + does not seem willing to counteract this by increasing its oil production, this will probably not change and oil prices should continue to rise.”

However, some analysts saw reasons to be cautious after the crude oil rally.

“While market appetite continues to be greatly aided by the energy crisis in Europe and Asia, a correction could be seen in oil,” said Pierre Veyret, technical analyst at ActivTrades, in a press release.

“Technically, the slowdown in the trend after reaching $ 80, combined with a bearish divergence in the RSI indicator, suggests that a technical correction might take place soon,” he said of the relative strength index.

Veyret sees strong support at $ 76.15 and $ 73.50 a barrel, but said that “given the current macroeconomic context, this lower target is unlikely to be met”.

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