An uncertain outlook for oil supply
Much of the speculative froth seems to have gone from the oil market, but sanctions on Russia is disturbing the crude oil supply.
The price of oil “whipsawed from a peak of $128 to as low as $98” in a fortnight as the market gyrated between Western sanctions on Russia, China’s Covid-19 surge and uncertainty about new supply from US shale drillers and Opec, says The Economist. Brent crude traded at around $119 a barrel on Wednesday, up by more than 50% this year.
The pullback from recent highs suggests some “speculative froth has blown off” the market, says Liam Halligan in The Daily Telegraph. But note also that “Western energy sanctions, while extremely serious, are not quite as tight as suggested by the belligerent political rhetoric”. It may be “the end of the year at the earliest” before Russian crude stops flowing to the UK and the EU.
Sanctions have caused shipping delays and disruption to global oil markets, says BCA Research. But by May ships will have been rerouted and China and India, keen to snap up Russian energy at a discount, will have put sanctions work-arounds in place. Western policymakers are putting pressure on Saudi Arabia and the United Arab Emirates to boost supply, but this is complicated by the fact that Saudi Arabia and Russia are “strategic partners”, says Daniel Yergin of IHS Markit. “Ever since the price collapse of 2014” Riyadh’s “goal had always been to bring Russia into a [supply] agreement” rather than have it “stand outside as a competitor”.
Subscribe to 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
US shale producers may raise output, but Western oil producers are reluctant to invest. “The US has been looking for other sources of supply, including possible barrels from Venezuela, which has been under sanctions,” says Patti Domm for CNBC. A nuclear deal with Iran could bring one million barrels per day back onto markets, “but those talks have bogged down in recent weeks”.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex Rankine is Moneyweek's markets editor
-
Higher rates are disappearing – should you fix your savings?
Fixed savings rates have dropped to their lowest levels in over a year. Should you fix your savings now ahead of a potential base rate cut in November?
By Katie Williams Published
-
Nine million people fall victim to financial scams, says Citizens Advice
The charity says that around one in five people across the UK have been caught out by a finance scam in the past year - here is how to protect your money
By Chris Newlands Published
-
What will a broken-up Google look like?
The US courts have ruled that Google is a monopoly, leaving it facing the prospect of a break-up. WIll that be a good thing?
By Matthew Lynn Published
-
How will the UK gambling sector be hit by the Budget?
There are concerns for the UK gambling sector in the lead-up to the Autumn Budget. What could be on the cards?
By Dr Matthew Partridge Published
-
HSBC returns to cost-cutting plan
HSBC is set to revamp its commercial banking division – but will it come at a cost?
By Dr Matthew Partridge Published
-
Pfizer shares rise as US investor takes $1 billion stake
Pfizer shares are on the up since US activist investor Starboard Value built up a stake in the drug maker. But strategic options appear limited
By Dr Matthew Partridge Published
-
Qualcomm could acquire rival Intel – but securing the deal won't be easy
A tie-up between Qualcomm and its semiconductor rival Intel would be a coup. But multiple regulatory and commercial hurdles lie ahead.
By Dr Matthew Partridge Published
-
How to invest in the quiet market months
Here's how to invest in the quiet market months, since “sell in May” hasn’t paid off this year.
By Cris Sholto Heaton Published
-
Spire Healthcare: invest in the booming demand for private healthcare
Spire Healthcare is one of the few listed companies benefiting from the growing trend in private healthcare. Should you invest?
By Rupert Hargreaves Published
-
Are insurance companies a good investment?
Costs may be soaring but the insurance sector is currently going through one of its most profitable periods. The market has been slow to realise the opportunity here
By Rupert Hargreaves Published