| 6°C Dublin

High energy prices likely to last into winter as oil hits $85 a barrel

Close

Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman. Photo: Andrey Rudakov/Bloomberg

Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman. Photo: Andrey Rudakov/Bloomberg

Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman. Photo: Andrey Rudakov/Bloomberg

The price of oil in the US rose above $85 (€73) a barrel for the first time since 2014, another landmark in a surge in global energy prices, while a rally in market structure deepened.

Futures in New York rose as much as 2pc on Monday, while global benchmark Brent also advanced.

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told Bloomberg Television that producers shouldn’t take the increase in prices for granted. That conservative stance was echoed by both Nigeria and Azerbaijan.

The oil market’s structure has rallied even faster than headline crude prices. West Texas Intermediate crude for immediate delivery traded more than a dollar higher than the next month as traders pay premium prices to secure supplies. Stockpiles at Cushing, Oklahoma, the biggest storage hub in the US, are rapidly shrinking, and supplies fell another 2.84 million barrels last week, according to traders.

“This market is going to be undersupplied for longer and that’s just helping keep prices high and pushing them higher,” said Rob Thummel, a portfolio manager at Tortoise, a firm that manages roughly $8bn in energy-related assets. “There’s growing confidence that oil demand is going to get back to, and exceed, pre-Covid levels.”

The price of oil has more than doubled over the past 12 months and is fanning inflationary concerns. So far, there appears to be little end in sight for the rally, and Wall Street has been steadily upping its views of the market, expecting prices to trade higher for longer. Goldman Sachs says consumption is on the cusp of returning to pre-Covid levels, while the Organisation of Petroleum Exporting Countries and its allies have been restrained in easing the draconian supply cuts imposed in 2020 to salvage prices.

Prince Abdulaziz said demand may increase by 500,000-600,000 barrels a day if the northern hemisphere’s winter is colder than normal and companies switch from gas to crude. He also warned that more barrels from OPEC+ would do little to curb costs of gas in Europe and Asia or petrol in the US.

The strength in the oil market is being dominated by a relative scarcity of so-called light-sweet barrels, which are low in sulphur and produce lighter products like petrol.

Business Newsletter

Read the leading stories from the world of business.

This field is required


Most Watched





Privacy