Oil prices edged lower on Tuesday, dropping for the first time in four days in what analysts called a breather after weeks of gains fuelled by a rebound in global demand that is contributing to energy shortages in major economies.
Brent crude was down 6 cents at $83.59 a barrel at 0440 GMT, after touching three-year highs on Monday on the way to a 1.5% advance. U.S. oil fell 13 cents to $80.39 a barrel, having also gained 1.5% in the previous session, in which it reached the highest in around seven years.
“There is still plenty of momentum behind the oil rally and the fundamentals remain extremely favourable,” said Craig Erlam, senior market analyst at OANDA. “Will it be a surprise to see oil back in the triple digits later this year? Probably not.” Power prices have risen to records in recent weeks, driven by energy shortages in Asia,
Europe and the United States. Soaring natural gas prices are also encouraging power generators to swap the cleaner-burning fuel for oil. Switching to oil from natural gas for power production may boost global demand for crude by between 250,000 to 750,000 barrels per day, analysts have estimated.