Oil prices have surged above $80 a barrel for the first time in three years, as markets braced for even tighter supplies due to resurgent demand that showed no signs of stopping in some locations.
Brent crude, the global benchmark, rose as much as 0.8 per cent to touch $80.19 a barrel during Asia trading today, its highest price since October 2018.
After oil prices slumped as low as $20 a barrel during the worst of the pandemic, today’s rise sent crude almost 55 per cent higher for the year to date.
Tightening supplies led Goldman Sachs to raise its year-end forecast for Brent prices from $80 a barrel to $90 a barrel.
“While we have long held a bullish oil view, the current global supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast and with global supply remaining short of our below consensus forecasts,” analysts at the bank said.
A combination of a fast recovery in fuel demand since the worst of the Delta variant and a shortfall in production, especially in the Hurricane Ida-hit US, has tightened global supplies and pushed crude prices higher.
Meanwhile in the UK, Boris Johnson is preparing to draft in the army to deliver fuel as the country grapples with a supply crisis that has led to many petrol stations running dry from “panic buying.”
This perfect storm pushed the FTSE 100 up 0.5 per cent to 7087 yesterday, with oil producers – including Royal Dutch Shell, whose share price hit its highest level since March 2020 – and banks coming out on top.
“There were plenty of factors to trouble investors as the new trading week kicked off, yet there certainly isn’t panic in the air,” said Russ Mould, investment director at AJ Bell.
“Many investors, including big asset managers, will be kicking themselves that they shunned oil stocks as part of a global shift towards more ESG-friendly companies. Despite the transition to renewable energy around the world, it is clear oil is still needed in today’s world.