US oil prices rose above $85 a barrel on Monday for the first time in seven years, as traders bet that crude supplies would not keep pace with fast-rising global demand and analysts said a wider energy crunch was spreading to petroleum markets.
The latest price surge came as Goldman Sachs estimated that global oil demand had now almost entirely recovered from last year’s coronavirus-induced collapse and would “shortly” hit its pre-pandemic peak of 100m barrels a day, as Asian economies rebounded from a wave of Delta variant infections.
The bank said soaring natural gas prices in Asia were also pushing consumers to buy more oil for use in power generation — an unexpected outcome of the energy crunch that was adding at least 1m barrels a day to global demand.
West Texas Intermediate, the US benchmark, rose 2 per cent to a high of $85.41 a barrel on Monday morning before falling back to settle flat for the day at $83.76.
Brent, the global crude benchmark, also rose sharply before falling back to $85.99, a 0.5 per cent rise for the day.
US stocks meanwhile advanced to highs after a slight pullback at the end of last week.
The blue-chip S&P 500 index rose 0.5 per cent, closing at a record high for the second time in the past three sessions. The advance was led by consumer-focused stocks and companies that stand to benefit from elevated commodity prices.
The tech-heavy Nasdaq Composite climbed 0.9 per cent, though it remained about 1 per cent below the record close it hit in September.
Electric carmaker Tesla was among the biggest risers, climbing 13 per cent and becoming the first carmaker to hit a $1tn market capitalisation after rental company Hertz said it had ordered 100,000 of its vehicles.
Moves in the largest tech companies such as Amazon and Apple were more muted as investors await a flurry of third-quarter earnings announcements. Facebook reported its latest results after the market close on Monday, while Microsoft and Apple will follow later in the week.
More than 300 companies on Wall Street’s blue-chip index will report in the next fortnight — equivalent to 59 per cent of the S&P 500’s market value, according analysis from Credit Suisse.
Those anticipated corporate updates come after shares in social media platform Snap slid more than a quarter on Friday in response to the company warning of reduced advertising revenues. Other tech bellwethers, including Facebook, suffered knock-on losses in the wake of Snap’s report.
European equities were little changed on Monday. The region-wide Stoxx 600 index closed 0.1 per higher, while London’s FTSE 100 index was up 0.3 per cent.
In Asia, Hong Kong’s Hang Seng closed roughly flat as improvements in healthcare and industrial stocks were tempered by a drop in real estate shares after Beijing said at the weekend it would expand trials for a property tax.
In government debt markets, the yield on the 10-year US Treasury note, which falls when prices rise, rose 0.02 percentage points to 1.63 per cent, while the equivalent UK gilt yield also slipped 0.04 percentage points to 1.14 per cent.
Central banks around the world are contemplating how to react to widespread inflationary pressures. Huw Pill, the Bank of England’s chief economist, told the Financial Times last week that the headline rate of UK inflation could exceed 5 per cent next year.
The European Central Bank is due to meet on Thursday, with meetings lined up in early November for the US’s Federal Reserve and the Bank of England.
“We do believe that central banks will have to bring clarity to . . . market pricing in their upcoming meetings,” said Samy Chaar, chief economist at Lombard Odier, noting that increases were priced in for “close to now in the UK”, for the second or third quarter of next year in the US, and “even a lift-off from the ECB by the end of 2022”.
US economic growth data are due out this Thursday and economists are forecasting GDP expansion of 3.2 per cent on an annualised basis in the July to September quarter, compared with a 6.7 per cent expansion in the second quarter.
Source: Economy - ft.com
