Oil hits highest level in three years

London — Oil hit a multiyear high on Wednesday above $83 a barrel, supported by a refusal by Opec+ to ramp up production more rapidly against a backdrop of concern about tight energy supply globally.

The market later unwound those gains due to an American Petroleum Institute (API) report showing rising crude inventories in the US and, analysts said, technical indicators suggesting oil has rallied too fast.

On Monday, the oil cartel and allies chose to stay with a plan to increase output gradually and not boost it further as the US and other consumer nations have been urging.

Brent crude rose as high as $83.47, the highest since October 2018, and at 8.13am GMT was down 4c at $82.52. US crude climbed to $79.78, the highest since November 2014, and was later down 10c at $78.83.

“An energy crisis is unfolding with winter in the northern hemisphere still to begin, and sets the stage for even higher oil prices,” said Stephen Brennock of oil broker PVM.

The price of Brent has surged more than 50% in 2021, adding to inflationary pressure that could slow recovery from the Covid-19 pandemic. Natural gas has surged to a record peak in Europe and coal prices from major exporters have also hit all-time highs.

Jeffrey Halley, analyst at brokerage Oanda, said both crude contracts looked overbought based on a widely followed technical indicator, the relative strength index.

“That may signal some daily pullbacks this week but does not change the underlying bullish case for oil,” he said.

Some downward pressure came from the API’s figures showing signs of slowing fuel demand.

The industry group said US crude inventories rose by 951,000 barrels in the week to October 1, website Oilprice.com reported, and gasoline and distillate fuel inventories also climbed.

Attention will focus later on official inventory numbers due at 2.30pm GMT from the Energy Information Administration.

Reuters