Thomas Lyons 
The price of crude oil has spiked, leading to concerns that petrol prices may rise by the end of the month. Wholesale gas prices have also risen, which may delay cuts in utility bills for households and businesses. Brent crude oil surged by over 5% on Monday, reaching approximately $85 a barrel. This puts $100 a barrel back on the horizon, following the announcement by Opec+, a group of oil producers, of a surprise plan to cut output. Analysts have scrambled to update their price forecasts for the rest of the year. It typically takes at least two weeks for a sustained large increase in global rises in Brent crude to feed down the pipeline into price changes at petrol forecourts.
Last year, Russia’s invasion of Ukraine sent crude prices spiking as high as $133 a barrel. However, crude oil traded at an average price of $101 a barrel throughout the full year. This year, the average price had eased back to $82 a barrel. The reduction in output by Opec+ has surprised markets, which had expected the cartel to hold output steady. Prior to the announcement, the cartel’s own numbers suggested the group would need to pump more oil, not less, in the second half. With the International Energy Agency expecting a demand surge later this year, there is now renewed risk of a fresh inflationary impetus for the global economy.
“This cut proves again that Opec+ is proactive in managing the supply-demand balance and requires $90 to $100 a barrel,” said Nadia Martin Wiggen, an analyst at Pareto Securities. Goldman Sachs said the surprise cut in output was “consistent with their new doctrine to act pre-emptively because they can without significant losses in market share”. This, combined with the extension of the Russian production cuts, led Goldman Sachs to raise its Brent oil forecast to $95 a barrel for December this year from $90 earlier, and to $100 a barrel for December 2024 from $95. Bank of America said any unexpected 1m barrel per day change in supply or demand conditions over the course of a year could impact prices between $20 and $25 per barrel.
European wholesale gas has also risen sharply, reversing gradual falls since prices peaked at a record of €310 per megawatt hour last summer. Futures markets showed the price of gas for delivery in May also rose by 5% and traded at more than €50 per megawatt hour late Monday. Wholesale gas for delivery in August was also trading significantly higher, at more than €51 per megawatt hour. The price of wholesale gas is closely watched because a large portion of the power on the grid in Ireland and in other parts of Europe is generated by gas-powered stations, in particular when the wind does not blow during the spring and summer months.
The recent increase in crude oil prices may lead to a rise in petrol prices by the end of the month, while the increase in wholesale gas prices may delay cuts in utility bills for households and businesses. Brent crude oil surged by over 5% on Monday, reaching approximately $85 a barrel, following the announcement by Opec+ of a surprise plan to cut output. Analysts have scrambled to update their price forecasts for the rest of the year, with renewed risk of a fresh inflationary impetus for the global economy. Bank of America said any unexpected 1m barrel per day change in supply or demand conditions over the course of a year could impact prices between $20 and $25 per barrel.
European wholesale gas has also risen sharply, reversing gradual falls since prices peaked at a record of €310 per megawatt hour last summer. The price of wholesale gas is closely watched because a large portion of the power on the grid in Ireland and in other parts of Europe is generated by gas-powered stations, in particular when the wind does not blow during the spring and summer months. The futures markets showed the price of gas for delivery in May also rose by 5% and traded at more than €50 per megawatt hour late Monday. Wholesale gas for delivery in August was also trading significantly higher, at more than €51 per megawatt hour.
Goldman Sachs has raised its Brent oil forecast to $95 a barrel for December this year from $90 earlier, and to $100 a barrel for December 2024 from $95. The reduction in output by Opec+ has surprised markets, which had expected the cartel to hold output steady. Prior to the announcement, the cartel’s own numbers suggested the group would need to pump more oil, not less, in the second half. With the International Energy Agency expecting a demand surge later this year, there is now renewed risk of a fresh inflationary impetus for the global economy. This recent increase in crude oil prices and wholesale gas prices may have a major impact on the global economy, with consumers and businesses alike potentially facing increased costs.
In conclusion, the sharp rise in crude oil prices is a cause for concern for motorists, who may face increased petrol prices by the end of the month. Wholesale gas prices have also risen, which may delay cuts in utility bills for households and businesses. The futures markets have shown that gas prices for delivery in May and August have risen significantly. The reduction in output by Opec+ has surprised markets, leading to analysts scrambling to update their price forecasts for the rest of the year. The recent increase in crude oil prices and wholesale gas prices may have a major impact on the global economy, with consumers and businesses alike potentially facing increased costs.
