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Signs of a global energy crunch pushed oil prices above $80 a barrel for the first time in three years as markets grappled with the prospect of widespread fuel shortfalls heading into the end of the year.
Brent, the international benchmark, rose as much as 0.8 per cent to $80.19 a barrel during Asia trading on Tuesday, hitting a three-year high for the second consecutive day. Tuesday’s rise brought the price of crude almost 55 per cent higher for the year to date.
The latest gains for Brent came amid a broad rally in energy markets, with growing competition between Europe and China helping drive gas prices to record levels in recent weeks.
A shortfall in global gas production, along with a concerted drive in China to cut down on pollution from heavy industry, is expected to push crude higher as industries shift to using oil to generate power.
Chinese authorities’ clean energy drive, part of an effort to stave off an annual choking haze as Beijing prepares to host the Winter Olympics in February, has led to widespread outages that have disrupted factory activity and left many homes without power in the country’s north-east.
Chinese power producers have struggled to deal with a sharp drop in production that has pushed thermal coal prices in the country up 96 per cent this year.
Oil prices are also rising in China, with crude futures in Shanghai up 27 per cent from a low touched in late August, forcing Beijing this month to announce its first-ever public auction of state petroleum reserves to domestic refiners.
Meanwhile, the UK has been gripped by a fuel supply crisis triggered by part by a shortage of haulage drivers, with motorists queueing for petrol and stations running dry after a spate of panic-buying.
“We’re looking at not just the UK and Europe, but a potential global energy crisis coming into the winter,” said Robert Rennie, global head of market strategy at Westpac.
He added that with global energy demand rising as countries ease travel restrictions imposed to contain coronavirus, oil could face a worldwide shortage, with US inventory levels well below average ahead of the year-end peak consumption period.
“Throw on top of that power outages in China and concerns about levels of inventory around the world, and it’s understandable that we’re seeing upward pressure on crude”, Rennie said.
The spread of fuel shortfalls prompted Goldman Sachs this week to project a global energy rally for months to come. The investment bank forecast Brent would hit $90 a barrel before the end of the year.
In China, state media attempted to ease concerns by promising a swift end to rolling outages.
A front-page report on Tuesday in the Economic Information Daily, a newspaper run by state news agency Xinhua, said authorities were taking steps to ease electricity shortages and prevent unannounced power cuts.
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