Oil passes $80 per barrel

Financial institutions raise oil price projections

Close-up of a car refueling at a petrol station                                 
The price of fuel is skyrocketing and wars are breaking out at UK petrol stations – Photo: Shutterstock

Brent crude futures rose for the sixth consecutive day on Tuesday, surpassing $80 per barrel for the first time in three years. 

Although the theme of post-Covid demand outstripping supply has been consistent throughout much of 2021, the commodity jumped to multi-year highs in September as anxiety about a potential global energy crisis has mounted. 

Five weeks ago, Brent traded at $65 per barrel, weakened by concerns that the Delta variant of Covid-19 could prompt a return of government restrictions, limiting economic activity and thus weakening fuel demand.  

While such fears have since faded, activity in China, the world’s second-largest economy, has been limited by almost the opposite problem. As a result of limited fuel supply, substantial demand and new state regulations of carbon emissions, energy has become so expensive that a number of Chinese cities have witnessed power outages, limiting output. 

Oil has also been helped by soaring natural gas prices, with consumers, companies and states forced to consider alternative energy sources. 

Raised forecasts

Although a disparity in oil supply and demand has been universally recognised by most financial institutions, the scale and speed of the latest gains have prompted many to revise their projections upward. 

Goldman Sachs recently stated that Brent could reach $90 per barrel by the end of the year, arguing that the deficit was larger than many even now think.

On Tuesday, Barclays raised its oil price forecast for next year by $9 to $77 per barrel. In a note, the firm stated that a supply shortage would prove to be “persistent”, and even if the Organisation of the Petroleum Exporting Countries (OPEC) and its allies tapered production cuts as planned, it “would not not plug the oil-supply gap through at least Q1 2022”. 

Barclays further observed that “limited market share threat from US production growth means there is no urgency for OPEC+ producers to step on the gas”, adding that some within the consortium itself lack the capacity ‘to ramp up output”. 

UK fuel shortage

The price of petrol in the United Kingdom continued to tick upwards in the face of a looming supply crisis. 

A shortage of heavy goods vehicle (HGV) drivers in the wake of Brexit and the Covid-19 lockdowns has increased shortage fears and triggered a wave of panic-buying at petrol pumps across the UK, with frustration over shortages sparking fights as tempers frayed.

According to the UK Petrol Retailers Association, around 90% of fuel stations across England’s major cities ran dry on Monday as a result. 

By 13:00 BST, spot Brent crude and WTI crude traded up by 1.19% and 1.24% at $79.02 and $74.88 per barrel, respectively. 

Further reading: Nickel dips in the wake of China’s energy crisis

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