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Oil Prices From Around the World Rise Above $80

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As crude oil reached beyond the 80-dollar mark, prices of coal, carbon, and European gas have all hit record highs. With this upsurge, it has become apparent that an energy crunch, which would have an adverse effect on economic growth, is imminent. 

In fact, Brent crude skyrocketed as much as 0.9 percent to $80.22 a barrel, achieving a three-year high for the second consecutive day before settling 0.6 percent lower at $79.09. It even posted three straight weeks of gains, whereas U.S. crude futures rose $1.47, or 2%, to settle at $75.45 a barrel, its highest since July, after rising for a fifth straight week.

Now that prices have been steadily rising for seven consecutive days alongside the energy crisis in Europe, analysts strongly foresee that they will continue to do so during surging demand and tight supplies. 

Because European benchmark gas prices that are up for delivery next month have climbed another 10 percent, costs have doubled since the middle of August while the price of offsetting carbon emissions continued to rise, moving past €65 a ton in intraday trading last Tuesday.

According to investment bank Goldman Sachs, Brent could hit $90 per barrel by the end of the year, warning that rising input costs, higher gas prices and weaker growth were likely to weigh on European corporate profit growth for 2021. It raised its year-end forecast for Brent crude to $90 per barrel, considering that global supplies have tightened as a result of the fast recovery of fuel demand from the outbreak of the Delta variant of the coronavirus and Hurricane Ida’s hit to U.S. production.

“When growth slows, it becomes harder for companies to pass on higher input costs, which is the main risk for net income margins,” the Wall Street lender proclaimed. “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,” it added.

The said growth came into existence when the pound experienced its biggest one-day drop against the dollar on Tuesday, tumbling 1.3% to just under $1.3530 despite inflation fears. It was its lowest since January, as investors sought a safe haven in the dollar.

In an interview, Jordan Rochester, a currency analyst at Nomura, said that rising inflation concerns are making sterling-denominated assets less attractive. On the other hand, Brent crude has already gained about 55% for the year to date. West Texas Intermediate (WTI) also rose to around $75 a barrel.

In light of the recent developments, global oil demand is expected to reach pre-pandemic levels by early next year as the economy recovers. However, producers and traders from around the world shared that spare refining capacity could still weigh on the outlook.

As expressed by Greg Hill, president of Hess Corporation, global demand is seen rising to 100 million barrels per day by the end of 2021 or in the first quarter of 2022.

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