Oil hit a three-year high above $86 a barrel on Thursday driven by tight supply and a global energy crunch, although prices eased as some investors took profits on signs the rally is looking overstretched.
Helping to drive the latest gain, a supply report from the U.S. Energy Information Administration on Wednesday showed crude and fuel inventories tightened, with crude inventories at the Cushing storage hub falling to a three-year low.
Brent crude rose as high as $86.10, the highest since October 2018, but later was down 99 cents, or 1.15%, to $84.83. U.S. West Texas Intermediate crude fell 70 cents, or 0.84%, to $82.72.
“We saw some correction, but overall sentiment remained firm as there have been no large increases in output by the United States or OPEC,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
The price of Brent has risen over 60% this year, supported by a slow ramp-up in supply by the Organization of the Petroleum Exporting Countries and allies, and a global coal and gas crunch which has driven a switch to oil for power generation.
Oil also came under pressure from a drop in coal and natural gas prices. In China, coal fell 11% on Thursday, extending losses this week since Beijing signalled it might intervene to cool the market.
“With coal and gas prices easing and with the relative strength index technical indicators still in overbought territory, the odds of a sharp, but material fall in oil prices are rising,” said Jeffrey Halley, analyst at brokerage OANDA.
Even so, some analysts are calling for oil to rally even more as OPEC+ is likely to stick to its plan for gradual output increases while demand is expected to reach pre-pandemic levels.
Giovanni Staunovo of Swiss bank UBS said in a report he expected Brent to trade at $90 in December and March.