Oil rises to new three-year high
Demand for fossil fuels continues to mount in run-up to COP26 in Glasgow
Brent crude futures rose to their highest level since October 2018 at the start of the week as global supply struggled to keep up with accelerating demand.
The commodity’s global benchmark rose by as much as $2 to $84.56 a barrel before retreating to just above $83 a barrel by mid-afternoon (BST).
Should the week end as it has begun, Brent and West Texas Intermediate crude futures will have risen for the sixth and eighth consecutive week, respectively.
Global energy crunch
Although the imbalance between supply and post-lockdown demand has been a consistent feature throughout the majority of 2021, fears of a global energy supply crunch have mounted since the start of September.
Last week, the Organisation of the Petroleum Exporting Countries resisted the exhortations of US President Joe Biden and announced it would not accelerate its planned monthly easing of production limits.
Addressing the issue of rising fuel prices, US Energy Secretary Jennifer Granholm mooted the possibility of tapping strategic petroleum reserves. The Department of Energy quickly rushed to clarify that it has “no plans to take action at this time”, further bolstering the commodity.
Threats of an energy crisis
Should it eventually opt to do so, however, the US would be following in the immediate footsteps of the Chinese government, which recently sold some of its strategic reserves for the first time on record in order to arrest runaway oil prices.
Substantial flooding exacerbated the threat of a fully fledged energy crisis engulfing the world’s second-largest economy over the weekend. Around 1.7 million people are thought to have been affected in Shanxi, a northern province that was already contending with intermittent power shortages and industrial disruption.
Shortages of gas oil plunged the Middle Eastern nation of Lebanon into darkness over the weekend. Electricity only returned on Sunday after emergency deliveries from the army to the country’s two largest power plants.
Such immediate anxieties have come only weeks before world leaders are due to assemble in Glasgow for the United Nations Climate Change Conference (COP26) in Glasgow. The meeting will focus on the long-term need for a transition towards renewable energy just as global demand for fossil fuels accelerates.
By 15:00 (BST), spot Brent crude traded up by 1.9% to $83.76 a barrel.