As in a pressure cooker, the beep indicates that the lid is about to pop. Oil continues its rise in international markets.
The psychological level of $100 may be a matter of days. The barrel of Brent surpassed $97 yesterday, the highest level since November 2022. Black gold prices have risen on average by a third since this summer, which represents the largest bullish streak since the collapse of confinement in June 2020.
Supply problems continue. U.S. crude oil inventories fell by about 2.2 million barrels last week, much more than expected, to about 416 million barrels.
The shortage of crude oil is beginning to be felt after the Organization of the Petroleum Exporting Countries, Russia and other allies that form the group known as OPEC have cut their production by 1.3 million barrels per day until the end of the year. The group of producers will meet on October 4 to analyze the situation. The cartel estimates that there is a deficit in the market of about three million barrels per day.
Despite the uncertainty about possible risks of recession, oil demand remains robust in both the United States and China, especially in transportation, putting pressure on prices on a global scale.
Although market turbulence always takes time to affect prices, fuels are also on an upward trend. In Spain they have had twelve consecutive weeks of growth. Since the start of summer, the increase is 17%. Gasoline is at annual highs, while diesel is at its highest since late January.
Fuel levels are higher than they were before the war in Ukraine, although they have not reached the record they reached more than a year ago, at the outbreak of the war.
The reaction in the stock markets is also being felt. According to Reuters estimates, Wall Street's three largest indices are set for their first quarterly decline in 2023. The fixed income market is already incorporating increased risk, with yields that have not been this high for more than a decade. decade due to uncertainty about interest rates, which may remain high for a long time.
The yield on the 10-year US Treasury bond, which is the benchmark for global borrowing costs, exceeded 4.6% for the first time since 2007. In Europe, Italian bonds are already offering returns not seen since the crisis of sovereign debt of 2012.
Pilar Gómez-Bravo, co-director of global investment at MFS IM and fixed income specialist, made the following analysis. “In Europe, inflation is essentially a supply phenomenon. But the European Central Bank (ECB), by maintaining high interest rates for longer, acts on demand,” reflects this expert.
“Still, the ECB cannot do anything else. Real rates in the eurozone are still negative. Since its mandate is to control inflation, it is confident that keeping the price of money at high levels will cool expectations, also on a psychological level. Thus, he waits for inflation to decrease, for supply chains to recover and for the energy crisis to calm down before a recession hits the eurozone so that he can have room to lower rates,” he says.
If risk premiums rise, who will be able to turn off the pressure cooker?
