Europe Looks to OPEC for Crude Oil Relief

Europe has looked to OPEC for crude oil relief amid geopolitical uncertainty driving volatility in the global energy markets.  

Crude oil futures are on the rise once more in pre-market trading as investors fret over the prospect of supply disruptions from one of the world’s largest suppliers of crude oil - Russia. EU leaders have urged OPEC to increase their supplies and fast-forward the group’s timeline on phasing out COVID-19 cuts.  

Saudi Arabia has the largest spare capacity within OPEC in addition to facing the largest exposures if COVID-19 outbreaks lead to more lockdowns – and less demand for fuel. The situation is complicated by the fact that OPEC and Russia have by-and-large coordinated their crude oil supply policies since 2016.  

Meanwhile, the world’s economies are recovering from COVID-19 recessions and demand for fuel may rise faster than supplies, creating the perfect inflationary storm. Realistically speaking, how high can crude oil prices go? They have not yet reached the level of $147 per barrel seen in 2008 but unless the supply risks subside, the volatility is likely to continue.  

In other news, investment markets still favour the safe-haven USD as the Federal Reserve eyes more interest rate hikes and the central bank head Jerome Powell said inflation was much too high. The US Dollar Index continues to be supported by the hawkish rhetoric as USD-denominated assets from savings to Treasuries gain attraction.  

Spot gold prices

Spot gold prices remain relatively high but gold bulls are tempered by the strengthening USD making the precious metal a more expensive asset at the time of writing.  

Stock markets in Europe are feeling the strain of geopolitical events and rising fuel prices as investors seek more direction in economic developments. The Euro remains under pressure as recession and inflation fears grow. Financial events to watch today include ECB President Lagarde’s speech which may provide clues to the central bank’s plans to taper QE later this year. 

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