Oil prices rose on Monday, extending pre-weekend gains, with U.S. crude hitting a seven-year high as global supply remained tight amid strong demand worldwide as economies recover from coronavirus pandemic-induced slumps.
Brent crude futures settled 0.54% higher at $85.99 per barrel, following on from last Friday's 1.1% gain. The contract was near a three-year high of $86.10, hit last Thursday.
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U.S. West Texas Intermediate (WTI) crude futures settled flat at $83.76 per barrel, after climbing 1.5% on Friday. It touched its highest since October 2014 — $84.28 — earlier in the session.
"Bullish sentiment continues to support oil prices as global supply remains tight at a time when demand is recovering from the pandemic," said Toshitaka Tazawa, an analyst at Fujitomi Securities.
"But immediate gains for the WTI's nearest-term contract may be limited given steepening backwardation," Tazawa said.
WTI futures contracts are currently in steep backwardation, meaning later-dated contracts trade are at a lower price than the current contract. Normally later months trade at a higher price, reflecting the costs of storing oil.
Oil prices have also been bolstered by worries about coal and gas shortages in China, India and Europe, which spurred fuel-switching to diesel and fuel oil for power.
Reflecting strong market sentiment, money managers raised their net long U.S. crude futures and options positions in the week to October 19, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
Over the weekend, Saudi Arabia's crown prince said that the world's top oil exporter aims to reach 'net zero' emissions of greenhouse gases, mostly produced by burning fossil fuels, by 2060 — 10 years later than the United States.
Meanwhile U.S. energy firms last week cut oil and natural gas rigs for the first time in seven weeks even as oil prices rose, energy services firm Baker Hughes Co said in its closely followed report on Friday.