Oil gushes to $70 a barrel to fuel price concerns for Irish households and business

Oil prices rose for a third day as the easing of lockdowns in the US and parts of Europe heralded an increase in fuel demand over the summer months, fuelling the prospects for increased energy bills for Irish households and businesses.  

Brent crude was 69 cents, or 1%, higher at $69.57 a barrel, while the other major benchmark, US West Texas Intermediate  rose 61 cents to $66.30 a barrel.

Both contracts hit their highest levels since mid-March in intra-day trade. 

"A return to $70 oil is edging closer to becoming reality," said Stephen Brennock of oil broker PVM.

"The jump in oil prices came amid expectations of strong demand as Western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high," he said. 

The jump in crude oil prices is already fuelling inflation, according to the Organisation for Co-operation and Development. 

In new figures, the Paris-based organisation said energy prices pushed OECD inflation up to 2.4% in March, up from the annual rates of 1.7% in February. 

Annual energy prices rose sharply by 7.4% in March, the highest rate since October 2018, it said reflecting "both the base-year effect with a sharp drop in energy prices in March 2020 and a contemporaneous rise in energy prices in March 2021".

In comparison, food price inflation slowed slightly to 2.7%, compared with 3% in February. 

OECD annual inflation excluding food and energy increased slightly, to 1.8% in March, compared with 1.7% in February. 

Crude prices were also supported by a large fall in US inventories.

The American Petroleum Institute (API) industry group reported that crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources.

The rise in oil prices to nearly two-month highs has been supported by Covid-19 vaccine rollouts in Europe and the US where more than 40% of US adults have received a vaccine.

Eurozone business activity accelerated last month as the bloc's dominant services industry shrugged off renewed lockdowns and returned to growth.

"The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise," Commerzbank analyst Eugen Weinberg said.

This has offset a drop in fuel demand in India, the world's third-largest oil consumer, which is battling a surge in Covid infections.

"However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment," ING Economics analysts said of the situation in India. 

Reuters and Irish Examiner