Oil prices head above $80 per barrel as fuel crisis beds in
Energy markets have stayed in focus as the most volatile factor in markets on Tuesday in London, as the price of oil per barrel headed above $80 for the first time in around three years.
Brent Crude (BZ=F) was 0.8% higher, to trade at $80.18 by 2.30pm in London, later dipping back to around $78.83 per barrel by the closing bell. Crude (CL=F) was also up around 1.2% to trade at $76.34, before settling 0.8% higher at $74.89 later on.
The fuel supply crisis has forced the UK government to draft in the army as long queues at petrol stations head into their fourth day.
Up to 150 military tanker drivers will prepare to deliver to forecourts which have run dry because of panic buying.
Earlier in the week, the spiralling petrol crisis forced the UK government to suspend competition law via the Downstream Oil Protocol to help oil companies to work together to deliver fuel to petrol stations that are running dry. The protocol would help fuel producers, suppliers, hauliers and retailers to prioritise the delivery of fuel to the parts of the country and strategic locations that are most in need.
“While energy shortages are likely to have a negative impact on economic growth, strength in the oil price was good news for Royal Dutch Shell and BP,” said Russ Mould, investment director at AJ Bell.
“Shell and BP are among the biggest constituents of the FTSE 100 and so their share price performance has considerable weighting on the direction of the overall index. Their stocks advanced by approximately 2% on Tuesday, making them the top performers after Smiths Group which jumped 3.6% on an update regarding the sale of its medical division.
Despite Shell and BP moving up, it wasn’t enough to lift the FTSE 100 overall as the index was fighting negative movements from miners, pharmaceuticals and financials.
US stock futures were also down ahead of US Federal Reserve chair Jerome Powell’s appearance later on Tuesday. The central banker is expected to say that the inflationary pressures have lasted longer than anticipated but are set to fade.
“It seems that hawks have convinced the Federal Reserve to begin tapering in November 2021 and this is creating a drama in the markets,” said Naeem Aslam, chief market analyst at AvaTrade.
Read more: UK house prices hit record high yet again
US consumer confidence also saw another sharp fall in September, coming in at 109.3, and a 6-month low, reinforcing the cautious narrative that began back in August when consumer confidence unexpectedly plunged from 125.10.
Over in Asia, equities had a mixed day with Chinese stocks heading higher. The Hang Seng (^HSI) finished 1.7% higher, the SSE Composite (000001.SS) was trading 0.6% up by the close and Japan’s Nikkei (^N225) was down 0.2%.
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