Oil price races higher as demand rebounds
Supply constraints, increased demand and the Russian threat to Ukraine are sending the oil price racing towards $100 a barrel.

Oil prices are racing towards $100 a barrel. Brent crude futures hit $96 a barrel early this week, the highest level in more than seven years. That reflected fears of an imminent Russian invasion of Ukraine, a risk that traders had largely ignored until now. “Russia produces ten million barrels of oil a day, roughly 10% of global demand,” says Clifford Krauss in The New York Times. A war, and resulting Western sanctions, could remove some of that supply from global markets.
This week’s jump shows traders starting to “price in a sizeable geopolitical risk premium” into oil prices, say Christopher Matthews and Collin Eaton in The Wall Street Journal. While Western governments are reluctant to sanction Russian energy, they may ultimately be forced to do so.
Demand exceeds supply
Oil markets were already tight. The Opec+ group of producers, which includes Saudi Arabia and Russia, is struggling to keep up with demand: it has been raising production quotas in response to a recovering global economy, but several members are pumping less than they planned. Total output was a record 747,000 barrels per day short of the collective quota in December, according to energy-research firm BloombergNEF.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
A slew of recent outages in Nigeria, Ecuador, Libya and Kazakhstan is keeping a lid on global supply, says Radmilla Suleymanova for Al Jazeera. At the same time, the Covid-19 Omicron variant has also failed to dent the world’s appetite for petroleum as much as had been feared at the end of last year. The International Energy Agency thinks that global demand for oil will return to pre-pandemic levels – roughly 100 million barrels per day – by the end of the year, up from the current level of 97 million per day, says The Economist. Some are more bullish: Opec+ expects demand to reach 103 million barrels per day.
Raising forecasts
Wall Street analysts have started to forecast $100 or even $120 a barrel oil, but not everyone is convinced. If Ukraine tensions cool and Washington manages to do a deal with Iran about its nuclear programme – which could bring one million barrels per day back onto global markets – then prices could yet fall. “The real wild card is shale,” says the Economist. US investors are thought to have lost $300bn in the last boom-and-bust cycle, but higher prices are tempting some oil prospectors to try their luck again. Not for the first time, American shale drillers may yet come to the rescue.
High oil prices are ultimately “self-correcting” because they encourage higher output, says Jeremy Warner in The Daily Telegraph, “but they can do an awful lot of damage in the meantime”. Oil appears to be following natural gas higher: European gas prices hit the oil-price equivalent of $350 a barrel late last year and are still trading at the oil-price equivalent of around $160 a barrel. That has given power stations in the US and Japan an incentive to shift from burning gas to burning oil for electricity, raising demand for the latter. Could oil spike as high as gas, towards $300 a barrel? “Perhaps not that high, but something much higher than now is certainly plausible.”
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
HMRC confirms crypto ETN ISA rules
With crypto ETNs now technically available for UK retail investors, HMRC has confirmed they can be held in an ISA – but there’s a complication
-
Pensioners targeted in fine wine scams – the tactics to watch for
Wine has emerged as the latest lure in investment fraud, with pensioners being specifically targeted by scammers
-
Pierre-Édouard Stérin wants to make France great again
Conservative billionaire Pierre-Édouard Stérin is seeking to lead a political and spiritual renaissance across the Channel. The planning looks meticulous
-
Global investors have overlooked the top innovators in emerging markets
Opinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Pinewood Technologies: a drive for growth
Pinewood Technologies’ platform is one of the best in the business. Investors should buy in
-
'EV maker Faraday Future will crash'
Faraday Future Intelligent Electric is failing dismally to live up to its name, says Matthew Partridge
-
Investors should cheer the coming nuclear summer
The US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
8 of the best houses for sale with follies
The best houses for sale with follies in the grounds – from a five-storey Victorian Gothic tower in Tonbridge, Kent, to a former mill in Oxfordshire with gardens that include a folly on an island in a lake
-
A tale of two Reits – why performance matters for valuation
AEW UK and Regional are two Reits that are valued very differently, despite a shared focus on properties outside London
-
Healthcare stocks look cheap, but tread carefully
Shares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?