Oil Is Not Well

Oil prices have surged alongside a broader rally in commodities including natural gas and coal amidst an energy crunch that’s sweeping Europe and Asia. Armaan Madhani explains how this has a negative fallout on most sectors dependent on this commodity

- Armaan Madhani

The US oil benchmark, West Texas Intermediate (WTI) crude futures recently eclipsed the USD 80 per barrel mark for the first time since November 2014. Crude oil prices on the Multi-Commodity Exchange (MCX) also surpassed ₹6,100 per barrel, rallying to its highest level since October 2014 on the back of soaring demand, narrow supplies and buoyant domestic as well as global equity markets. Other factors that have contributed to this phenomenal rally include less drilling by shale gas producers in the US, hurricanes in the Gulf of Mexico, impending winter and revamping of commercial activity globally as the pandemic allays.

The OPEC and OPEC plus countries’ decision to adhere to their schedule to gradually hike oil production by 4,00,000 barrels per day in November despite the recent fuel shortage is suggesting a further upside in the prices of black gold. Oil prices have surged alongside a broader rally in commodities including natural gas and coal amid an energy crunch that’s sweeping Europe and Asia. US natural gas futures surged to more than USD 6 per million British thermal units, their highest price in seven years, after inventories of the furnace and power plant fuel grew by less than expectations, thereby amplifying concerns about supplies for the upcoming high demand winter season.