Oil rises to new three-year high

IEA predicts oil demand will outstrip supply by 700,000 bpd for the rest of 2021

Oil prices rose to a new three-year high on Friday, bolstered by the continued supply deficit and increased demand expectations as a number of major nations struggle with energy crises. 

Brent crude futures rose by 90 cents, briefly surpassing the $85 (£61.80, €73.31) per barrel threshold, while West Texas Intermediate futures traded as high as $82.30 per barrel. 

IEA predictions

On Thursday, the International Energy Agency (IEA) stated that oil demand would outstrip supply by 700,000 barrels per day (b/d) for the rest of 2021. 

The Paris-based organisation added that oil demand in the past eight weeks was 500,000 b/d higher than normal.

In addition to the general price inflation witnessed in the wake of the Covid-19 crisis, the recent surge in natural gas and coal prices has driven oil prices higher as governments, businesses and retail customers look for fuel alternatives. 

Putin

When asked at a conference on Wednesday whether WTI could reach $100 per barrel in the near future, Russian President Vladimir Putin said: “That is quite possible.”

The Russian leader added: “Russia and our partners and OPEC+ [Organisation of the Petroleum Exporting Companies Plus] group, I would say we are doing everything possible to make sure the oil market stabilises.

“We are trying not to allow any shock peaks in prices. We certainly do not want to have that, it is not in our interests.”

Three weeks ago Goldman Sachs raised its year-end Brent crude forecast to $90 per barrel. 

The currencies of oil-rich nations strengthened following the latest highs, with the Canadian dollar and Norwegian Krone trading up by 0.7% and 1.1% against the Japanese yen, respectively. 

Oil giants also welcomed the news, with UK-listed firms keeping the FTSE 100’s head above water. By 13:20 (BST), Royal Dutch Shell stood 1% higher at 1,763.60 pence, while BP traded up by 1.2% at 362.25 pence. 

Spot Brent and US crude traded 0.7% and 0.6% higher at $84.31 per barrel and $81.42 per barrel, respectively.

Further reading: US PPI rises to 30-year high

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