(adds Brent settlement) 

By Barani Krishnan

Investing.com – U.S. crude posted a seventh straight weekly gain, its second such winning streak since December, and breached $80 a barrel on Friday for the first time since 2014 in a rally energized as much by hype as real demand.

Crude prices had already been cresting daily highs the past few weeks on signs that Europe could have a brutal winter that could force utilities there to use more oil for power generation and heating instead of overpriced and critically undersupplied .

The rally, however, took on a new dimension in the past 24 hours after Bloomberg discredited a Financial Times report saying the U.S. government was considering selling oil from its reserves and planning to reintroduce a 40-year-old ban on crude exports to cool an energy market that was fueling runaway inflation.

The FT story on Wednesday had quoted Energy Secretary Jennifer Granholm as saying the sale from the Strategic Petroleum Reserve and the crude export ban were among tools the government had to battle a supply and price crisis in oil now. 

Bloomberg, following up on that report, said on Thursday the Energy Department had “no plans to take action at this time.” But the original FT report itself — that “all tools in the tool box are always under consideration to protect the American people” — wasn’t denied. 

Crude prices initially tumbled some 3% on Granholm’s remarks. But the Bloomberg report prompted bulls in the market to chase prices up again, beyond how much they fell, to a net gain of 5% or more on the week.

“This market is looking for any excuse to rally and that Bloomberg version of events on the SPR just gave the bulls what they needed,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. 

“It’s just like how we shot up last week on OPEC not adding anymore to production, when it was just a reinforcement of their targets, albeit in a pressured market. The OPEC commitment itself didn’t change, but the hype over it went up like ten-fold.”

At Friday’s settlement, U.S. crude’s benchmark was up $1.05, or 1.3%, at $79.35 per barrel. Earlier in the session, it peaked at $80.11, its highest since 2014. For the week itself, WTI rose 5% for its seventh-straight weekly gain that has given the U.S. crude benchmark a cumulative gain of 27%. For all of 2021, WTI is up 63%. 

London-traded crude, the global benchmark for oil, settled up 44 cents, or 0.5%, at $82.39 per barrel. For the week, Brent finished up 4% for a fifth straight weekly gain. For the year, Brent is up almost 59%.

Natural gas declined almost 1% on the week, snapping six previous weeks of gains. For the year though, gas prices are up almost 120%. 

Gas futures are hovering at $5.57 per million Btu. By comparison, Reuters reported that average prices for LNG cargoes delivered into Asia next month are quoted at around $37 per mmBtu.

While crude prices generally set the trend for other fuels in the global market, the situation is currently reversed, as shortages of gas and coal – especially in Asian markets – create a rare opportunity for oil-powered electricity generators.

Demand for motor fuel is also staying strong as the global wave of Delta-variant Covid-19 recedes, allowing the reopening of big energy-consuming economies in south and south-east Asia.

Rystad Energy analyst Louise Dickson noted that the market doesn’t need to be as tight as it is, given that OPEC and its allies still have more than 8.6 million barrels a day of crude oil output capacity lying idle.

“The group is seemingly basking in higher prices, at least in the very short-term, depriving the market of the only supply cushion that exists,” Dickson said in a note to clients. “OPEC+ controls 95% of global crude oil spare capacity and there simply aren’t other sources to tap into to bring more of an equilibrium to the market.”

(With additional reporting by Geoffrey Smith)