Oil prices surged to their highest levels in three years as a post-pandemic surge in demand and constraints on production raised fears of tightening supplies.
Brent crude headed towards $80 a barrel, its most expensive since October 2018, after major oil-producing nations struggled to increase output fast enough amid ongoing maintenance delays caused by Covid-19.
US production in the Gulf of Mexico is also being held back after Hurricane Ida slammed into the Louisiana coast last month, shutting down most of the region’s oil rigs and refineries and placing further pressure on global stockpiles.
Upward trend: Analysts at Goldman Sachs predict that Brent crude will hit $90 a barrel by the end of the year
The price surge seems set to continue, with analysts at Goldman Sachs predicting that Brent crude will hit $90 a barrel by the end of the year. They said the gap between global supply and demand was larger than they had initially expected.
Analysts also said a global shortage of natural gas will ‘increase oil-fired power generation’, pushing prices up even further.
Some big winners of the price spike were BP and Shell, both of which notched up strong gains. Shares in BP were up 3.5 per cent, or 11.1p, to 331.3p while Shell climbed 4.4 per cent, or 66.6p, to 1595p, its highest level in six months.
Smaller oil and gas firms also received a boost, with mid-cap Harbour Energy rising 8.3 per cent, or 28.6p to 373.2p while North Sea-focused Enquest bobbed up 5 per cent, or 1.15p, to 24.3p.
Meanwhile, oilfield services companies were lifted by expectations of increased demand, with Lamprell adding 8 per cent, or 2.5p, to 33.8p and John Wood Group up 1.9 per cent, or 4.3p, to 228.1p.
AJ Bell investment director Russ Mould said: ‘Many investors, including big asset managers, will be kicking themselves that they shunned oil stocks as part of a global shift towards more ESGfriendly companies. Despite the transition to renewable energy around the world, it is clear oil is still needed in today’s world.’
The FTSE100 inched up 0.2 per cent, or 11.92 points to 7063.4. The FTSE 250 was virtually flat at 23608.63 points.
Fears of ongoing fuel shortages and inflation concerns continued to linger, while investors also digested the inconclusive result of the German election on Sunday.
Meanwhile, retail giant JD Sports has reportedly entered the beauty market by buying a stake in Hairburst, a maker of shampoos, hair vitamins and styling products. However, investors seemed unimpressed as the shares fell 2.2 per cent, or 24.5p, to 1076.5p.
Hikma Pharmaceuticals was lifted 1.2 per cent, or 29p, to 2415p after snapping up injectable medicines maker Custopharm for £274m. The deal will add 13 products approved by US regulators to Hikma’s own injectables business.
Office property firm Workspace climbed 0.8 per cent, or 7p, to 873p after it acquired a 57,000 sq ft office space in London for £43m.
Saietta Group, a maker of electric vehicle motors that listed in London in July, was one of AIM’s biggest risers after unveiling a deal to supply its technology to electric cargo bike maker Electric Assisted Vehicles (EAV). Saietta shares surged 21.5 per cent, or 42.5p, to 240p following the news.
Fellow small-cap firm Elixirr soared 28.6 per cent, or 150p, to a record 675p after the consultancy reported that profits in the first half of 2021 had more than doubled, rising to £6.4m from £2.6m.
Water firm United Utilities dipped 1.3 per cent, or 13.3p, to 994.2p as it said higher inflation was pushing up its operating costs. Despite this, the firm was still seeing a demand boost from customers continuing to work from home.
Covid-19 test maker Novacyt slipped 4.1 per cent, or 12.7p, to 299p as a contract dispute with the Department of Health and Social Care (DHSC) took a chunk out of its half-year revenues.