Oil futures rose Tuesday, headed for a fourth straight gain amid signs of tight supplies that has users scrambling for crude.
West Texas Intermediate crude for November delivery
CL00,
CLX21,
rose 55 cents, or 0.7%, to $81.07 a barrel on the New York Mercantile Exchange. WTI closed above $80 Monday for the first time since October 2014.
December Brent crude
BRN00,
BRNZ21,
the global benchmark, was up 35 cents, or 0.4%, at $84 a barrel, 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 tight supply conditions.
The premium between the December 2021
CLZ21,
and December 2022
CLZ22,
crude futures hit $8.50 on Monday, its highest since 2014, noted Carsten Fritsch, analyst at Commerzbank, while the differential for Brent hit nearly $8, its highest since 2013.
“Such high premiums for short-term oil deliveries point to an acute tightness of supply, brought about by robust demand and limited supply,” Fritsch wrote. “For as long as OPEC+ appears unwilling to counter this by expanding its oil production to a greater extent, this is unlikely to change, and oil prices are likely to continue rising.”
But some analysts saw reasons to be cautious following crude’s rally.
“While the market appetite remains significantly supported by the energy crisis in Europe and Asia, a correction may be looming for oil,” said Pierre Veyret, technical analyst at ActivTrades, in a note.
“Technically speaking, the slowdown of the trend after reaching $80 combined with bearish divergence on the RSI indicator suggest a technical correction could take place soon,” he said, referring to the relative strength index.
Veyret sees strong support around $76.15 and $73.50 a barrel, but said “this lower target is unlikely to be reached considering the current macro context.”
This post was originally published on Market Watch
