By Barani Krishnan

U.S. crude gained $7.7 per week, the second consecutive win since December. The price of crude reached $80 per barrel for Friday in an unprecedented rally that was as much driven by hype than real demand.

On signs of a severe winter in Europe, crude oil prices have been rising at a rapid pace over the last few weeks. This could lead to utilities being forced to burn more fuel for heating and power generation.

Bloomberg’s discredit of a Financial Times report that the U.S. was planning on selling its oil reserves, and reintroducing a 40-year old ban on crude oil exports, gave the rally a new direction. This was to help cool an energy market which was fueling inflation.

Energy Secretary Jennifer Granholm was quoted in the FT’s Wednesday story as saying that sale from the Strategic Petroleum Reserve, and ban on the export of crude were just two options available to government officials for addressing the current oil price and supply crisis. 

Bloomberg, following up on that report, said on Thursday the Energy Department had “no plans to take action at this time.” But the original FT report itself — that “all tools in the tool box are always under consideration to protect the American people” — wasn’t denied. 

Crude prices initially tumbled some 3% on Granholm’s remarks. The Bloomberg report caused bulls to pursue prices higher again. They went beyond the amount they had fallen to gain a net gain of at least 5% for the week.

“This market is looking for any excuse to rally and that Bloomberg version of events just gave the bulls what they needed,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. 

“It’s just like how we shot up last week on OPEC not adding anymore to production, when it was just a reinforcement of their targets, albeit in a pressured market. The OPEC commitment itself didn’t change, but the hype over it went up like ten-fold.”

At Friday’s settlement, U.S. crude’s benchmark was up $1.05, or 1.3%, at $79.35 per barrel. It reached $80.11 earlier in the session. This is its highest level since 2014. WTI rose by 5% during the week. Its seventh consecutive weekly gain has brought the U.S. benchmark crude oil index a cumulative 27% gain. WTI rose 63% in 2021. 

London-traded crude, the global benchmark for oil, was up  49 cents, or 0.6%, at $82.44 by 2:35 PM ET (18:35 GMT). Brent saw an additional 5% increase on the week. This was Brent’s fifth weekly gain. Brent has risen almost 59% for the year.

The week ended with natural gas prices falling almost 1%, snapping six weeks of gains. However, the gas prices for this year are almost 120% higher. 

The average price of gas futures is $5.57 for a million Btu. Reuters has reported that LNG cargoes being delivered to Asia this month will be priced at $37 per mmBtu.

While crude prices generally set the trend for other fuels in the global market, the situation is currently reversed, as shortages of gas and coal – especially in Asian markets – create a rare opportunity for oil-powered electricity generators.

Motor fuel demand is strong even as global waves of Delta-variant Covid-19 diminish, which allows for the opening of large energy-consuming countries in South and Southeast Asia.

Rystad Energy analyst Louise Dickson noted that the market doesn’t need to be as tight as it is, given that OPEC and its allies still have more than 8.6 million barrels a day of crude oil output capacity lying idle.

“The group is seemingly basking in higher prices, at least in the very short-term, depriving the market of the only supply cushion that exists,” Dickson said in a note to clients. “OPEC+ controls 95% of global crude oil spare capacity and there simply aren’t other sources to tap into to bring more of an equilibrium to the market.”

Geoffrey Smith also provides reporting