By Yuka Obayashi

TOKYO, Reuters – Monday’s oil prices rose, extending their gains from the weekend. They reached a seven year high due to tight global supplies amid strong demand globally as countries recover from slumps caused by coronavirus pandemic.

After last Friday’s gain of 1.1%, futures gained 26 cents (or 0.3%) to $85.79/barrel at 0048 GMT. Last Thursday’s $86.10 record was the closest to a 3-year high for this contract.

U.S. West Texas Intermediate crude oil futures increased 48 cents or 0.6% to $84.24 per barrel after rising 1.5% Friday. The session’s highest point was $84.28, which is the mark of October 2014.

Toshitaka Tazaawa, an analyst at Fujitomi Securities Co Ltd. stated that bullish sentiment continued to support oil prices because global supply is still tight. This comes at a moment when demand for the pandemic has begun to recover.

Tazawa stated that “but immediate gains for WTI’s closest-term contract might be limited due to steepening backwardation.”

WTI futures contract are in steep backwardation at the moment. Later-dated contracts trade at a cheaper price than their current counterpart. As a result of the high cost of oil storage, prices for later months tend to be higher.

Concerns about gas and coal shortages in China and Europe have raised oil prices. This has prompted fuel switching to diesel or fuel oil for energy.

In response to strong market sentiment money managers increased their net long U.S. crude options and futures positions during the week up to October 19, according the U.S. Commodity Futures Trading Commission.

Saudi Arabia’s Crown Prince said over the weekend that it aims to be the top-exporter of oil in the world by 2060. This is 10 years earlier than the United States.

Baker Hughes Co, an energy service firm, said that U.S. oil firms cut oil and rigs last Friday for the first time since seven weeks despite rising oil prices.