Energy companies have been forced to pull large amounts of crude out of inventories due to global output disruptions, sending oil prices to near three-year highs on Friday.
Chinese crude reserves were sold in their first publicly traded public offering, weighing on the rally.
Futures for Brent crude rose more than 100 basis points, to settle at $78 a barrel, while prices for West Texas Intermediate crude surged by 0.9% to settle near $74 a barrel.
Those were the highest for Brent and WTI closings since October 2018 and July 2021, respectively, both on the same day.
Brent crude is now targeting $80 a barrel, initial support is at $77.00 and $76.10 a barrel.
It is important to note that both relative strength indices on the oil contract are approaching overbought levels. It is more likely for oil to trade sideways rather than reach new highs in the upcoming sessions.
Markets are pricing in supply disruptions and storage drawdowns that will be required as oil prices are expected to rise for another week.
Inventories have already declined sharply in the U.S. and abroad due to disruptions that could last for months.
Refineries in the United States were turning to Iraqi and Canadian oil to replace Gulf crude. As a result of the resurgence in India’s crude imports, the country’s imports of crude reached their highest level in three months.
A few members of the Organization of Petroleum Exporting Countries and their allies, also known as OPEC+, have had trouble raising output during the pandemic as they have not invested as much or delayed maintenance.
Additionally, the United Kingdom is experiencing an energy crisis with higher oil prices causing motorists to panic buy fuel at the pump.
There were reports of gridlocks at gas stations on September 24, as panic buying took over and motorists’ desperation to fill up grew as Brent prices reached levels unseen in months.
This article was originally posted on FX Empire