The Department of Mineral Resources and Energy warned earlier this month that the natural gas crunch in Europe would spill over to other countries and lead to higher oil prices. Picture: Karen Sandison, ANA.
THE price of petrol in South Africa could surge to its highest again as the international crude oil price soared to yesterday breached a more than three-year high three-year amid rising concerns about supply tightness.
The price of Brent crude rose more than 1 percent yesterday of $84 (R1243) per barrel as shortages of natural gas in Europe and Asia boosted demand for oil.
The Department of Mineral Resources and Energy warned earlier this month that the natural gas crunch in Europe would spill over to other countries and lead to higher oil prices.
Oil prices have increased over the past year as a result of steady draws on global oil inventories.
Brent crude oil spot prices averaged $74 per barrel in September, up $4 per barrel from August and up $34 per barrel from September 2020.
In addition to sustained inventory draws, prices increased after the October 4 announcement by Opec+ that the group would keep current production targets unchanged.
The US Energy Information Administration said yesterday that it expected Brent prices to remain near current levels for the remainder of 2021, averaging $81 per barrel during the fourth quarter of 2021, which is $10 per barrel higher than its previous forecast.
“The higher forecast reflects our expectation that global oil inventories will fall at a faster rate than we had previously expected owing largely to lower global oil supply in late 2021 across a range of producers,” it said.
The Energy Information Agency (EIA) also raised its oil demand growth forecast for 2021 and 2022, saying that record natural gas prices would boost demand for oil.
In its monthly report, the EIA increased its global oil demand growth forecast by 170 000 barrels per day to 5.5 million for 2021, and by 210 000 barrels per day to 3.3 million barrels per day for 2022.
Analysts have warned that surging natural gas prices, a cold winter, and the reopening of international airline travel could push oil prices to $100 per barrel and trigger the next economic crisis.
They forecast that sharp increases in the petrol price could be expected as demand rose towards the festive season.
Anchor Capital’s co-chief investment officer, Nolan Wapenaar, said the natural gas market was in a structural deficit, with low inventories.
“Gas prices have been increasing rapidly and as countries are now substituting gas with coal and oil for energy production, the price of thermal coal and oil have also moved markedly higher,” Wapenaar said.
“Oil prices feed into the petrol price, and transport costs, directly or indirectly, represent a significant portion of the inflation basket for emerging markets.”
Last month, the average Brent crude oil price increased from $72.50 to $75.50 per barrel, triggering a 4 cents per litre and 22c per litre rise in petrol and diesel, respectively, in South Africa.
In August, the price of petrol rose to an unprecedented R18.20 per litre, driven by the higher international oil prices and a significantly weaker rand/dollar exchange.
FXTM’s senior research analyst, Lukman Otunuga, said yesterday that oil was continuing its upward trend, driven by the global energy crunch and supply restraints from the world’s top producers.
“The commodity found itself under pressure on Wednesday thanks to Opec’s monthly report and the American Petroleum Institute reporting a larger-than-expected increase in stockpiles,” Otunuga said.
siphelele.dludla@inl.co.za
BUSINESS REPORT ONLINE