Since the beginning of 2021 alone, the price of a barrel of WTI crude oil has risen by about 111 percent, which may be the biggest increase among popular energy commodities. Even natural gas, which is also often mentioned in this context lately, increased less, by 91 percent (contract quoted in the USA). What is more, oil still seems to be getting more expensive.
This morning, WTI crude oil continued its upward trend and surpassed the level of USD 84 per barrel, which is a new 7-year record. Global supply remains tight with increasing demand as countries gradually recover from the COVID-19 pandemic. And this confluence of events seems to be pushing prices higher.
Oil's price rally came despite a drop in coal prices, which initially caused power producers to switch from coal to oil and also improved sentiment after the pandemic standoff, as expectations of rising oil prices were raised.
Meanwhile, U.S. energy companies have now reduced the number of oil rigs for the first time in seven weeks, according to Baker Hughes in a report released Friday. Saudi Arabia, on the other hand, believes OPEC+ should maintain its cautious approach to managing global oil supplies, given the threat to demand still posed by the pandemic, Bloomberg reported.
Gold near $1,800
Rising prices for oil and other energy commodities could have a key impact on global inflation. Gold, on the other hand, often considered a hedge against inflation, appears to have risen to the $1,800 per ounce level earlier this week. The growing pressure of high inflation and a weak dollar may outweigh concerns about rising yields.
Federal Reserve Chairman Jerome Powell announced that the Fed is ready to begin tapering bond purchases, but maintains that an interest rate hike is premature as unemployment remains high. However, he acknowledged that inflation is well above target and could rise next year, which may prompt investors to hedge against this with gold purchases.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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