US oil hits highest since OPEC began price war against shale producers

• US oil prices hit a new seven-year high amid a surge in global demand and a supply crunch.
• The price of WTI crude oil is now at the highest level since OPEC began a price war against shale producers.
• Meanwhile, the price of Brent crude oil reached a fresh three-year high, inching above $85 on Friday.

US oil prices hit a fresh seven-year high on Friday amid a surge in global demand and an ongoing supply crunch.

The price of West Texas Intermediate crude, the US oil benchmark, climbed 1.24% to $82.32 per barrel as of 11:20 a.m. ET Friday, heading for an eighth consecutive weekly gain. On Monday, US oil closed above $80 for the first time since October 2014.

WTI is now at the highest level since the Organization of the Petroleum Exporting Countries launched a price war against US shale producers. In November 2014, OPEC stunned oil markets by refusing to curb its production amid soaring shale output. Crude prices then went into freefall as the oil group sought to force higher-cost US producers out of the market.

Since then, shale companies have prioritized returning more capital to shareholders instead of expanding production and taking market share from OPEC.

Meanwhile, the price of Brent crude oil, the international benchmark, reached a fresh three-year high Friday, inching above $85 intraday. It was up 1.04% to $84.87 per barrel by midday, on track for a 3% gain this week.

Oil prices got a boost earlier this month, when OPEC and its allies backed their plan for gradual output increases despite demand outstripping supply.

"The oil market deficit will only get wider as global stockpiles remain at low levels, unexpected demand comes from colder weather, and surging jet fuel demand as the US opens up international travel," Edward Moya, senior market analyst at foreign exchange firm Oanda, said in a note Friday.

The only trifecta that would derail an oil price rally is if OPEC+ unexpectedly boosts its output, warm weather hits the northern hemisphere, and the Biden administration taps the strategic petroleum reserves, he said.

Bank of America, for its part, said Brent crude could hit $100 a barrel for the first time since 2014, especially ahead of another cold winter.

Demand has accelerated since economies worldwide recovered from the pandemic. This was compounded by the rise in natural gas and coal prices, which have led some companies to shift to using oil - a practice that may add around 500,000 barrels a day to global demand, according to the International Energy Agency.

The agency, in its October market report released Thursday, said this elevated demand could last through the first quarter of 2022.