U.S. crude oil broke above $85 to continue its strong rally, and the imbalance between supply and demand continued to support oil prices

At the beginning of the New York session on Monday (October 25), U.
S.
crude oil prices continued their previous strong upward momentum, with U.
S.
oil prices reaching a maximum of $85.
07 during the day, up 1.
30%
during the day.
The imbalance between supply and demand caused by many factors such as reduced crude oil inventories and increased demand supported oil prices to continue to rise
.

The largest commercial storage facility in the United States lacks oil

Back in April 2020, inland West Texas Intermediate crude prices briefly fell into negative territory, costing traders a huge loss – when there was an unprecedented surplus in the spot oil market because there was so much oil
.
In just a few weeks, however, we've seen the opposite: there is no physical oil at all in the largest commercial storage facility in the United States, which could lead to continued spikes in oil prices
.

In a report predicting recent developments in the oil market, JPMorgan commodity strategist Natasha Kaneva wrote that in a world of widespread shortages of natural gas and coal, this is forcing the power sector to increasingly shift to oil-fired power generation, which will lead to an increase in winter demand for crude oil by 750,000 barrels per day, while current Cushing crude oil storage is at its lowest level since 2018.
.
.

JPMorgan analysis pointed out that if there is no change in Cushing crude oil storage in the next two months, we may expect US crude oil prices to soar to record highs
.

The current cold winter weather in the Northern Hemisphere is yet to arrive, but the 2021/2022 heating season is about to begin, and global gas prices are at an all-time high
.
Historically, if a cold winter arrives, demand for natural gas tends to outweigh any source of
supply.
In the U.
S.
alone, natural gas demand is likely to surge during the winter months with limited
supply.
JPMorgan observes that the current situation is so dire that it is becoming increasingly difficult
to find even a hint of spare capacity.

The analysis believes that the rise in oil prices in 2021 is far from over

Some analysts pointed out that the current Russian domestic gas storage is 97% full, and the full storage should be completed by November 1, when some capacity to Europe may be released
.

However, it was reported on Monday that Gazprom's supplies in November were the same as in October, and that these supplies were only 35% of the pipeline capacity exported to Europe, and that Russia did not opt for additional shipments through Ukraine
.
This means that Russia does not plan to ship more gas to Europe
until at least until the Nord Stream 2 project.

As JPMorgan noted, echoing what Goldman Sachs said earlier this week, if Russia does not produce additional production, the current price of natural gas imported into Europe will not be reduced until the weather outlook is determined
in January.
In short, current gas prices will be even higher, especially if the
winter is cold.

With record coal and natural gas prices, the power sector and energy-intensive industries are turning to oil, which could add 750,000 bpd to demand in the winter and 2.
1 million bpd
in November and December.
Earlier today, Reuters quoted Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, as confirming that users switching from gas to oil could meet 500,000-600,000 barrels per day, adding that the world is now waking up to oil shortages
.

Abdulaziz said the potential shift depends on how harsh the winter weather is and how expensive alternative energy sources are
.
He outlined a wide range of factors that have contributed to the recent spike in energy prices, including limited investment in hydrocarbons and infrastructure, low inventories, lifting pandemic lockdowns and COVID vaccination rates
.

At 21:24 Beijing time, the price of U.
S.
crude oil was $84.
96 per barrel
.