Oil Prices Surge Corresponding to Rising Fears Of Global Tightness

Meanwhile, talks for a nuclear deal with Iran will extend into September: Filer Image/Pixabay

Unrest in Libya's capital over the weekend stoked concerns that the country could soon experience a full-blown conflict and disrupt oil exports – which resulted in crude traders on Monday propelling
prices of the commodity upward by over 4 percent.

Brent settled up $4.10, or 4.1 percent, at $105.09 per barrel, while West Texas Intermediate settled up $3.95, or 4.2 percent, to $97.01.

Analysts noted that prices were also supported by expectations that the Organization of the Petroleum Exporting Countries (OPEC) might enact production cuts to better align prices with fundamentals, as well as a Reuters poll showing that U.S. crude oil stockpiles likely fell 600,000 barrels, with distillates and gasoline inventories also seen down.

Traders also took note of crude inventory in the U.S. emergency reserves falling by 3.1 million barrels in the week to Aug. 26 to the lowest since December 1984, according  to data from Washington.

Tina Teng, analyst at CMC Market, pointed out that even though a strong dollar limited Monday's gains, "The undersupply issue in the oil markets will probably continue to support the upside bias."

Goldman Sachs Group Inc. agreed that crude oil had the potential to push higher and in a note speculated that this was especially feasible given the shortages of other energy raw materials, including natural gas.

Industry leaders on Monday joined the chorus of those focused on the energy crunch: Ben Van Beurden, CEO of Shell Plc, told conference delegates in Norway that it's a "fantasy" to assume the crunch will be easy to solve; and Elon Musk, CEO of Tesla, told the same delegates that the world needs more oil and gas immediately as the slow transition to renewables continues.

The controversial billionaire insisted that "At this time, we actually need more oil and gas, not less," and he also voiced his support for nuclear power, stating, "If you have a well-designed nuclear plant, you should not shut it down - especially right now" – a clear reference to Germany's decision to shut its nuclear production by the end of this year.

Yet another contributor to an emerging bullish sentiment on Monday was Iran, which announced that negotiations with the U.S. over a European Union proposal to revive a nuclear deal will continue into September instead of being ratified this month, thus dashing any hopes that the Islamic republic would be able to flood the world market with oil.

This caused Ed Moya, senior market analyst at Oanda, to say, "The one trade that everyone can agree upon is that the oil market will likely remain tight."