Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
THE price of oil has risen above $80 a barrel for the first time in three years. And with shortages, rising demand and mutterings of all the makings of a potential global energy crisis, those $100 a barrel rumours are flying once again.
Yesterday, Brent crude, the international benchmark, rose by 0.8% to $80.19 a barrel, hitting a three-year high for the second consecutive day and taking the price of crude almost 55% above where it was this time last year.
Rising demand should not come as a surprise. The International Energy Agency has long forecast that consumption in 2022 will be around 5% higher than 2020 levels, when successive pandemic lockdowns saw demand for oil decline sharply around the world.
That now looks conservative. And more importantly concerning, with a cocktail of factors in the mix that suggest gas prices could hit record prices in the coming weeks.
It was only 18 months ago oil recorded its first negative price for the first time in history. The price of US oil benchmark West Texas Intermediate (WTI) dropped by almost 300% in April 2020 to trade around -$37 a barrel.
But three months ago Brent crude, already up 48% since the start of the year at $76 a barrel, was going the other way. And it was also around that time that a meeting of Opec members and allies (Opec+) ended in deadlock, after Saudi Arabia and Russia asked producers to increase production in a bid to ease rising oil prices. A requested extension of an existing supply deal to ensure stability as the world reopened after the global lockdown was met with a no.
And now, alongside a shortfall in global gas production, which includes US inventory levels well below average, all as we head into the year-end peak consumption period, there is also growing competition between Europe and China, which along with a concerted drive in China to cut down on pollution from heavy industry, is expected to push crude higher as industries shift to using oil to generate power.
All of which is making talk of $100 a barrel starting to look less mythical and more likely.
None of this will please motorists who - when they can find fuel to fill their tanks - are also likely to have to fork out more. But as an investor these are interesting times, especially given a potentially important role in pushing forward the climate action plans needed. A topic high on the agenda ahead of the November meeting of world leaders at COP26 in Glasgow.
Find out more about sustainable investing at Fidelity’s Sustainable and ESG investing hub.
Five year performance
(%) As at 31 Aug
Past performance is not a reliable indicator of future returns
Source: Investing.com, in USD terms as at 31.8.21
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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