Oil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging by almost 30% since June, after Russian and Saudi Arabian production cuts and rising demand from China.
Brent crude, the oil price benchmark, rose to a 10-month high last week of almost $94 a barrel, up from $72 a barrel at its lowest point in June – heading for its biggest quarterly increase since Russia invasion of Ukraine.
Over the same time period, the price of West Texas Intermediate, a lighter kind of US crude, increased from $67 per barrel to $90 per barrel. On the week, both benchmarks increased by around 4%.
Since June, the price of a litre of gasoline and diesel in the UK has increased modestly by 10p. Unleaded gasoline had an average price of £1.52 per litre on Friday, up from 1.43 in June, according to the automotive organization RAC.
Gasoline prices have increased by more than 10% in the US, where taxes account for a lesser amount of the price at the pump. A gallon (3.8 liters) now costs $3.90 (£3.15).
An increase in demand for flights in the US, Europe, and more recently China have spurred an even larger increase in jet fuel prices tracked by the Energy Information Administration (EIA). Prices averaged $3.07 a gallon at the end of August, up by 50% from a recent low of $2.05 in early May.
Earlier this month, Saudi Arabia extended 1.3m barrels per day (bpd) of combined cuts to the end of the year, accelerating a drawdown in global inventories.
Russia efforts to raise prices through supply reductions have aided other Opec nations ambitions to raise the price of a barrel to $100.
The International Energy Agency (IEA) warned last week that the ongoing supply cuts made by these two Opec+ leaders would create a “significant supply shortfall”, which poses a considerable threat to ongoing price volatility.
The report was released just a day after Opec announced that the market was facing a deficit of more than 3m bpd in the upcoming quarter, potentially resulting in the most substantial supply shortage in more than a decade.
Saudia Arabia and its partners in Opec are also concerned that the IEA has predicted that demand for oil will peak before 2030, which some analysts believe could be brought forward to 2026 by the rapid switch to renewables already under way.
Stephen Innes, managing partner at SPI asset management, said: “Oil wicked ripper is showing few signs of abating just yet.”
