U.S. West Texas Intermediate and international-benchmark Brent crude rallied to multi-year highs on Friday on a rebound in demand amid tighter supply inventories.

The U.S. benchmark crossed the psychological $80 per barrel level on Friday for the first time since November 2014, jumping more than 2% before easing into the close. Brent also rose more than 2% higher early in the session.

On Friday, December WTI crude oil futures settled at $78.76, up $0.80 or +1.03% and December Brent crude oil finished at $82.39, up $0.44 or +0.53%.

After taking a mid-week dip on worries about rising U.S. energy and product supplies, the rally picked up steam alongside a broader rally in commodities including natural gas and coal amid an energy crunch that’s sweeping Europe and Asia.

Other factors contributed to the markets up and down and up performance throughout the week until Friday’s surge.

Oil prices received a boost at the start of the week after OPEC+ opted to stick to a prior agreement to raise production by a modest 400,000 bpd in November despite the recent fuel shortage.

Ahead of that meeting, some traders thought OPEC and its allies might opt to bring more production online to meet rising demand, but some members took into consideration the possibility of lower demand due to a fourth COVID-19 wave, before deciding to leave the increase at 400,000 bpd.

Crude oil prices were also underpinned after the Department of Energy said it has no current plans to tap the Strategic Petroleum Reserve in an effort to cool the rally.

Gasoline Prices Rise as Traders Shrug Off Inventory Increase

On Tuesday, the American Petroleum Institute (API) reported a build in gasoline inventories – again for the second week in a row – of 3.682 million barrels for the week-ending October 1 – on top of the previous week’s 3.555-million-barrel build.

This was followed on Wednesday with the Energy Information Administration (EIA) reporting that U.S. gasoline stocks rose by 3.3 million barrels in the week to 225.1 million barrels, compared with analysts’ expectations for a 279,000-barrel drop.

Story continues

Despite the rise in gasoline inventories, the national average price for a gallon of gas stood at $3.22 on Wednesday, according to the AAA, which is the highest since at least October 2014. In some places, consumers are paying much more.

In California, the average price is more than a dollar higher at $4.42. In the state’s Mono County, prices have topped $5.

Short-term Outlook

The big news last week and the story that could eventually send prices for WTI and Brent crude oil to $100 per barrel is that some industries have begun switching fuel from high priced gas to oil. This is the kind of demand that the experts did not factor into their pricing models.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire


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