MARKET REPORT: Oil inventories rebound as Brent crude hits new highs

Oil inventories rallied as crude prices hit new highs late in the week.

Shell rose 3.9%, or 77p, to 2037p and BP jumped 3.4%, or 13.5p, to 405.9p as Brent crude prices climbed to over $93 a barrel, their highest level for about eight years.

Rising prices also benefited mid-cap oil tankers, with Harbor Energy up 4.3%, or 15.2p, to 365.2p while Capricorn Energy jumped 3.2%, or 6.4p, at 208.4p.

The bottom line: Rising demand as the global economy emerged from the pandemic has left supplies struggling to keep up as the world’s largest producers

Wood Group, which provides engineering and maintenance services to the oil and gas sector, rose 4.9%, or 10.6p, to 229p.

Pressure on crude supplies has been further heightened by reports that several oil transportation and storage facilities in Germany, Belgium and the Netherlands have been hit by cyberattacks.

While it’s still unclear who was responsible and whether the attacks were coordinated, the disruption adds to a list of factors that have helped push up oil prices in recent months.

Soaring demand as the global economy emerged from the pandemic has left supplies struggling to hold up as the world’s largest producers try to balance appeased demand while maintaining profitable prices.

On Wednesday, Opec members including Venezuela and Saudi Arabia agreed to gradually increase oil production.

However, it has failed to stem the tide of rising prices, fueling the spike in energy costs currently hitting the UK and other major oil consuming countries.

Richard Hunter, head of markets at Interactive Investor, also reported that a winter storm sweeping through the United States had heightened the threat of a supply disruption, further driving up energy prices and “adding pressure.” ‘inflationary mill water’.

Adding to all this is the ongoing tension on the Ukrainian border, with some analysts fearing that a Russian invasion of the country could see the latter’s oil and gas exports cut off from the market by US and EU sanctions.

Instability in the Middle East and Africa could also disrupt supply. The crude price spike may not be over yet, with some analysts including Goldman Sachs predicting that Brent could break above $100 a barrel this year.

The FTSE100 fell 0.17%, or 12.44 points, to 7516.40 while the FTSE250 slipped 1.16%, or 255.74 points, to 21712.04.

The Bank of England’s interest rate hike appears to have pissed off some traders, as such moves tend to drive up the value of the pound and put pressure on the profits of blue chip companies making their money abroad.

Copper giant Antofagasta retained the Footsie, which fell 2.5%, or 31.5p, to 1,227p as investors continued to worry about potential tax hikes by the Chilean government.

Other significant fallers included investment platform Hargreaves Lansdown (down 3.5%, or 47.5p, to 1,307p) and asset manager Intermediate Capital Group which fell 4.2% , or 80p, at 1846p.

However, the index received some support from telecommunications giant BT, which jumped 3.4%, or 6.4p, to 192.45p after a target price hike to 220p from 210p by analysts at DZ Bank .

Mid-cap miner Centamin, the operator of Egypt’s Sukari gold mine, was also up, rising 2.3%, or 2.04p, to 91.1p, after one of its major shareholders Schroders increased its stake in the group to 5.1 percent from 4.9 percent.

Airtel Africa, a new entrant to the FTSE100 following the exit of miner BHP (up 0.2%, or 5p, to 2,420p), nearly doubled its profits amid booming revenue.

Profit for the nine months to the end of December was £380m, up from £193m a year ago, while revenue jumped 21.7% to £2.5bn. The shares fell 1.2%, or 1.8p, to 155p.

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Steve R. Hansen