Oil extended four weeks of gains amid oil tight fuel supply and a weaker dollar. Elevated prices are fanning concerns that the world economy may be heading for a recession. As a result, these concerns will surely affect economies response to the crisis.
West Texas Intermediate futures topped $111 a barrel. Gasoline and diesel prices have been rallying to records ahead of the start of the US driving season. The prompt spread for Brent crude jumped to a seven-week high. This is in line with crude supplies constricted by the boycott of Russian shipments. With that, the product markets are straining as refining capacity fails to keep up with the rebounding demand.
The rise in energy costs has contributed to rampant inflation, prompting central banks to raise rates and stoking investor concern growth will slow. Moreover according to a White House official, the Biden administration is considering tapping a little-used emergency diesel fuel reserve to mitigate the supply crunch amid Russia’s invasion of Ukraine.
Moreover, the head of the International Energy Agency and India’s oil minister, speaking at the World Economic Forum in Davos, issued warnings about the risk of high prices.
“We may see prices even going higher. Being much more volatile and becoming a major risk for a recession for the global economy”. This is what IEA Executive Director Fatih Birol said in an interview with Bloomberg TV from Davos.
If you have further questions about the topic of oil tight supply, feel free to contact us here.