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Oil Prices Hit Multi-Year Highs as Energy Crisis Lingers On

UTC by Benjamin Godfrey · 3 min read
Oil Prices Hit Multi-Year Highs as Energy Crisis Lingers On
Photo: Depositphotos

In response to the global energy strain, the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+ decided to increase production in a steady manner. 

Oil prices have soared to their multi-year highs as increasing demand for fossil fuels has lingered on amid the ongoing global energy crunch. The continued COVID-19 vaccinations are helping many economies return to optimal economic activities, and are correspondingly driving a massive surge in energy demands to power operations.

Brent Crude, the international benchmark soared 2%, adding $1.62 to hit $84.01, its highest price level since October 2018. While the price of West Texas Intermediate shot up by 2.5% to $81.3 a barrel in early European trading, US Crude Oil also soared by $1.95, or 2.5%, at $81.30 a barrel to print its highest trading price since late 2014. These oil prices are a product of continuous demand for oil, with production capacities not necessarily expanding at the expected rate to cushion the current strain.

Inflationary growth is also a factor stirring the price of crude products, all placing an additional strain on most country’s economies.

“There’s no direct news flow, the moves are momentum-driven where intermarket factors implying higher expected inflation are supporting the bullish move in oil prices,” said Kelvin Wong, commodities analyst at CMC Markets in Singapore.  

The Department of Energy, despite considerations to unlock the country’s oil reserves, has reeled back on its plans in this regard, pursuing an alternative that may see current industry players ramp up their production activities.

“The news from last week that the Department of Energy is not planning to tap into strategic reserves for now is keeping the oil market tight and is supporting prices,” said UBS analyst Giovanni Staunovo. 

Per a Reuters report, drillers in the country are shoring up their production capacities, taking advantage of the increase in prices, and added five new oil wells last week, the fifth straight weekly increase in oil and gas rigs. 

Oil Prices Surge: OPEC Choosing to Maintain Gradual and Steady Production

In response to the global energy strain, the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+ decided to increase production in a steady manner. 

“Depleting stocks, OPEC discipline, and the ongoing energy crunch will provide solid price support in the next three months,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. 

The ongoing global energy crises have pushed analysts to express a bearish outlook on the US economy in the coming years. Beyond oil, analysts at Goldman Sachs Group Inc (NYSE: GS) downgraded their forecast for the US economy in 2021, and 2022, citing shrinking government fiscal support by the end of the year and “a more delayed recovery in consumer spending” as the “two challenges” to growth in the medium term.

With these latest forecasts, the US economy’s GDP is now expected to grow by 5.6% this year and 4% in 2022, estimates that is down from 5.7% and 4.4% as previously projected by the analysts.

Commodities & Futures, Market News, News
Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.

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