Oil may hit $120 a barrel – analyst
City analysts have warned that IL prices could rise over the next few weeks, further worsening fuel shortages and causing an energy crisis in the winter.
This in turn would put intense pressure on central banks to raise interest rates faster than they would like.
Crude is already at a seven-year high as OPEC refused to raise output levels last night to boost profits.
Some experts say that Brent crude has risen from xx to xx today and may move towards $100 or $120.
This will feed through higher prices on domestic heating and pumps. Gas and coal are already at the highest prices on record.
Bank of America said: “Like in 1970 or 2008, oil could once again become a destabilizing factor leading to the next macro crisis.”
It says $120 a barrel is possible. The government says the petrol crisis is easing as the military helps deliver fuel to the forecourt, but problems remain, especially in London.
While the oil boom is partly a sign of economic recovery, it is feeding inflation which in turn could derail growth.
The Bank of England is still insisting that inflation will peak at 4% and then fade quickly. There is growing skepticism about this forecast.
Jeffrey Haley, senior market analyst at OANDA, said: “Assuming the energy squeeze is the new normal, it is difficult to see transient inflation as transient as the world’s central bankers are predicting/expecting. This will affect the supply of the entire world. Will be felt on the chain.”
Deutsche Bank warned that “The rise in energy prices has sparked renewed fears about inflation, which is even faster than current forecasts, with implications for central banks.
Russ Mold at AJ Bell said: “The continued magic of high energy prices could slow recovery and stifle demand growth. It may perhaps help consumers and companies and governments need a greener, more renewable world and higher fuel bills. That leaves them with an uncomfortable near-term choice between their wishes.”
The latest IHS Markit/CIPS PMI, a measure of growth, for September came in at 54.9, up slightly from August. But supply chain issues are clearly wreaking havoc and driving up costs.
Tim Moore at IHS Markit said: “Tighter constraints on commercial capacity and wider supply chain uncertainty have meant that service providers have become more willing to pass on higher costs to customers. Average prices charged by UK service sector firms The latest increase in the U.S. was the fastest in 25 years of data collection, with many businesses reporting more frequent reviews of pricing due to rising cost escalation by suppliers.
Uneasiness among businessmen is increasing.
Duncan Brock at CIPS said: “The chokehold on supply chain delivery making food, fuel and logistics more expensive was a factor in undermining business optimism for activity over the next 12 months.”