There’s no doubt that oil has endured a challenging few years, with prices fluctuating wildly against the backdrop of a sustained imbalance between supply and demand.
This trend was exacerbated during the coronavirus pandemic, as global demand crashed and the price of WTI crude oil slumped below $30 per barrel and the market hit five-year lows.
However, oil prices have recently soared to seven-year highs, creating a more positive outlook and improved market sentiment. But what does this trend mean for businesses on these shores?
The Rise of Oil Prices and its Core Triggers
The US crude oil price jumped by a further 2% to $79.30 per barrel at the beginning of October, with the asset reaching its highest price since prior to the global commodity crisis in 2015.
Brent futures also climbed to a three-year high during this period, following the decision of the OPEC+ group of producers to stick to its planned output increase rather than striving to raise this further.
Interestingly, this has coincided with a record hike in natural gas prices, with Dutch wholesale gas valuations breaking the €100 level for the first time ever recently. In the UK, wholesale gas prices rose by 14% to £2.79 at the beginning of October, while prices for immediate delivery increased by 23%.
These price hikes have been triggered by soaring global demand in the wake of the pandemic recovery, while the prolific supply line between Russia and Europe has been diminished.
This, along with wider supply chain issues across the globe, is driving the cost of energy and fossil fuels up globally, and this trend shows no sign of abating any time soon.
What Do Businesses Need to Know?
Of course, businesses across the board are being impacted by this, as the cost of the daily energy that they need to heat their premises and drive their ventures rises incrementally.
However, some business types are being affected more than others, with steel factories offering a relevant case in point.
Certainly, they’re struggling to remain fully operational as gas supplies dwindle, while the food industry (particularly carbon-packed products) are also being impacted. Additionally, such entities are seeing their operational costs soar, leaving them, their business and their share values precariously placed.
Fortunately, there are some steps that companies can take to safeguard their interests in the current market, including engaging in futures trading in the UK.
With futures contracts, you can agree to buy or sell relevant commodities at a predetermined price and point in the future, creating a degree of stability and helping brands to plan more effectively in the near-term.
