Sonali Paul

MELBOURNE (Reuters – Friday’s oil prices climbed, with gains exceeding 2%. The increase in tight supply is a result of rising coal and gas prices, which will fuel a switch from petroleum products to the market.

U.S. West Texas Intermediate oil futures rose 0.4% or 30 cents to $81.61/barrel at 0156 GMT. That’s an 87-cent jump from Thursday. On the week, there was a 3% increase in contract prices.

After picking up 82cs during the last session, futures rose 0.3% or 28 cents to $84.28/barrel. The contract was set for an increase of 2.3% for this week.

Analysts noted a dramatic drop in oil stocks of the OECD, which is at their lowest point since 2015. With the recovery of COVID-19, demand has increased. Industry is switching from costly gas and coal to use fuel oil and diesel as a source of power.

Vivek Dahar, Commonwealth Bank commodity analyst, said that the “energy crisis” has caused the energy sector to rise, and oil has been a beneficiary.

According to the International Energy Agency, the oil shortage is likely to increase demand by approximately 500,000 barrels per daily (bpd). This would lead to a shortage of approximately 700,000. Until the Organization of the Petroleum Countries (or OPEC+) adds more supply as per plan in January, this will result in a gap of about 700,000.

Dhar explained that Dhar is looking at a very narrow window in which things could tighten significantly, but it will be weather dependent.

Analysts at RBC Capital Markets said that the global oil market was preparing for a bull cycle. This is due to supply tightening while demand strengthening simultaneously.

Michael Tran from RBC stated in a note that “we retain the view that has been held throughout the year – that there is still a strong oil market in its early years of a multi-year cycle structurally strong,”