Oil Mixed as Energy Crisis Stoke Recovery Fears

By Adedapo Adesanya

The prices of the two crude oil grades closed mixed on Tuesday as traders weighed the effect that higher energy costs could have on the global economic recovery.

While the Brent crude fell by 32 cents or 0.38 per cent to trade at $83.33 per barrel, the United States West Texas Intermediate (WTI) crude rose by 7 cents or 0.09 per cent to sell at $80.59 per barrel.

Energy prices have surged to record highs in recent weeks, driven by shortages in Asia and Europe, with an energy crisis in China expected to last through year-end, raising worries about the growth of the world’s economy.

Although prices have risen by more than 15 per cent since the start of September, with Brent rising for five consecutive weeks and WTI seven straight weeks of gains, people have started to realise that the higher prices could derail growth.

The International Monetary Fund (IMF) emphasised that persistent supply chain disruptions and inflation pressures are constraining the global economic recovery from the pandemic.

In its World Economic Outlook, the IMF trimmed its 2021 global growth forecast to 5.9 per cent from the 6.0 per cent forecast it made in July.

It, however, left a 2022 global growth forecast unchanged at 4.9 per cent.

Meanwhile, China and India continue to feel the impact of the power supply gap just as fears continue to grip the market.

In England, data showed that 10 per cent of fuel stations in its capital, London, and southeast England remained dry following panic buying.

Even as demand grows, the Organisation of the Petroleum Exporting Countries and allied producers, known as OPEC+, are sticking to plans to restore output gradually rather than quickly.

The oil cartel was supposed to pump a combined 37.141 million barrels in September per its quotas but a survey showed that the actual total was 570,000 barrels per day below this number.

This shows that it was higher than the previous month by more than the 400,000 barrels per day OPEC+ agreed to add to the market every month.

In other words, while OPEC+ was overperforming on its monthly production boost, it was underperforming on its own quotas.

The September total, per the data, was 6.712 million barrels lower than the baseline production level agreed to by OPEC+.