Oil prices grow on a higher trend second day in a row

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For the second time this week, Oil prices surge yesterday, gathering momentum from its earlier downward trend.

This new trend is caused by falling temperatures in China, the world’s biggest energy consumer as spike concerns about its ability to meet heating demand needs amid power and coal shortages.

Brent crude rose 24 cents, or 0.3 per cent to $84.57 a barrel after falling 0.6 per cent on Monday. The contract is still up nearly 7 per cent this month.

U.S. West Texas Intermediate futures gained 35 cents, or 0.4 per cent to $82.79 a barrel, having risen 0.2 per cent in the previous session and nearly 10 per cent this month.

Brent fell on Monday after China released growth figures that disappointed the market but with temperatures falling as the northern hemisphere winter approaches and heating demand increasing, prices of oil, coal and natural gas are likely to remain elevated, traders and analysts said.

Colder weather has already started to grip China, with the temperature forecast to fall to near freezing in northern areas, according to AccuWeather.com.

“Tightness in energy markets meant supply side issues remain prevalent and commodities prices remain supported,” said an energy derivatives trader based in Singapore.

Coal futures in China rose as much as 7.8 per cent on Tuesday, while riskier assets like equities were also higher. The rising coal and natural gas prices in Asia are expected to cause some end-users to switch to lower-cost oil as an alternative.

However, the power crunch that is sending prices higher is also hurting Chinese economic growth, which fell to the lowest in a year, according to official data on Monday.

China’s daily crude oil processing rate also fell again last month to the lowest level since May last year.

Helping keep a lid on prices, U.S. oil output is set to rise. Production in the largest shale formation in the U.S., the world’s biggest oil producer, is expected to gain further next month, according to an official report.