Oil Prices Surge to Three-Year Highs

Oil prices climbed on Monday to the highest level in three years on mounting expectations the natural gas crisis will spill over into other commodities at the same time as the global economic recovery boosts demand. Brent, the international benchmark, rose for a fifth straight day, adding 1.4 percent to $79.22 a barrel. The price of Brent has advanced about 50 percent this year and 9 percent this month. The strong rally comes as businesses and consumers increase their usage of everything from petrol to airplane fuel at a time when governments are lifting social curbs imposed to slow the spread of coronavirus.  

Goldman Sachs, one of the most influential banks in commodity markets, said it expected the rally to continue and forecast Brent to hit $90 a barrel by the end of the year, up from a previous estimate of $80. “The current global oil supply-demand deficit is larger than we expected,” it said, adding that demand had recovered “even faster” from the impact of the Delta coronavirus variant than anticipated and that global supply remained constrained. 
The oil price increase comes amid a wider rally in energy markets, particularly in gas, which has hit record prices in recent weeks driven by under-investment in production, high demand, and competition for supply between Europe and China. The impact of the gas crunch has been felt across several industries and is expected to lead to a rise in oil-fired power generation in some countries if gas prices remain high. 

Catastrophic hurricanes halting production have not helped the situation. Hurricanes Ida and Nicholas swept through the Southeast and shut down production in the Gulf of Mexico for weeks. 

The British government has put the military on standby as part of further measures to address a supply chain crisis that has led fuel pumps to run dry amid panic-buying by motorists this week. 

The move to mobilise the army comes after a widespread shortage of truck drivers, which has led to serious supply problems for retailers and restaurants in the past few months, has meant plentiful stocks of fuel have not reached filling stations. 

A warning of fuel supply shortages at the end of last week has led to panic buying, with long lines of cars waiting for hours to fill up, and resulted in pumps in cities across Britain running dry. 

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