As the global economy treads on nascent recovery from the deadly coronavirus pandemic, rising Oil prices are posing a threat to many large economies and the developing world.
On Monday, oil rose over 2% with Brent crude up $1.70, or 2.1%, at $84.09 a barrel, its highest since October 2018. US West Texas Intermediate (WTI) crude rose $2.08, or 2.6%, to $81.43 for its highest since late 2014.
Crude has gained more than 60% this year as the roll-out of Covid-19 vaccines lifted movement curbs and, subsequently, oil demand. An energy crisis is gripping major economies with no sign of easing even as major oil producers remain firm on restrained supplies.
So, why is oil market on a continuous boil?
– Prices have risen as more vaccinated populations are brought out of coronavirus lockdowns, supporting a revival in economic activity.
– At the same time, from Asia to Europe, the global commodity prices, including those used as fuel for power generation such as coal and gas, have also surged. In India, some states are experiencing electricity blackouts because of coal shortages. China’s government, meanwhile, has ordered miners to ramp up coal production as power prices surge.
– This makes oil an attractive commodity for generating power and keep the economic activity steady, and thus the higher demand is pushing crude markets higher.