Oil prices plunge ahead as concern over ‘more brutal’ Covid mutation skyrockets

Surging energy and fuel costs push inflation to near-decade high

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Heightened fears around the renewed spread of Covid and a new variant have been blamed with concerns travel restrictions in particular will lower global demand for fuel. Russ Mould, investment director at AJ Bell, said: “The drop in the oil price is the market’s way of saying it is worried about a reduction in economic activity, something which also explains the slump in metal prices. Markets are clearly speculating that a rapid spread of a more brutal Covid strain could once again derail the global economy.” Global markets plummeted on Friday with shares in oil companies, such as Shell and BP, recording heavy losses.

Oil prices have been growing steadily overall in recent months, with Brent crude breaking past $80 (£60) a barrel earlier in October.

Growing pressure on consumers at petrol pumps this week saw a number of countries, including the UK, join forces.

A coordinated release of oil from emergency reserves was organised in an effort to bring down prices.

The US lead the way with a release of 50 million barrels of crude oil from its Strategic Petroleum Reserve (SPR).

All eyes will now be turning to a meeting of the Organisation of Petroleum Exporting Countries (OPEC+) on Thursday at which the group will decide production levels for January.

Steen Jakobson, chief investment officer at Saxo Bank, predicted the meeting would be made “extra hard” with the combination of weaker demand due to Covid and the reserve releases.

OPEC Includes countries such as Saudi Arabia and Iran.

Its wider grouping OPEC+ includes additional members, such as Russia.

The US decision to release oil from reserves has been seen to highlight the growing frustrations with the group who have repeatedly rejected requests from the Biden administration to bring more oil onto the market.

Earlier this week, Fatih Birol head of the International Energy Agency, accused OPEC+ of being responsible for “artificial tightness” in global oil supplies.

Chris Beauchamp, chief market analyst at IG, said: “Today’s news hugely clouds the outlook for oil – how far will the variant spread and how much will it affect the global economy?

“If to a serious degree then OPEC may feel no increase in production is necessary.

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“Even if it does not spread too far OPEC may yet opt to hold production steady, since the recent pullback in oil prices has relieved the pressure on the group for the time being.

“However, into 2022 we can expect more production increases, given the use of SPR reserves merely decreases the inventory available and puts pressure on stockpiles into next year.”

OPEC had previously been planning a 400,000 barrel a day hike in output.

It’s been reported some members of the group may now push for this to be cut or paused completely in response to the reserve release and fall in prices.

Reuters reports one OPEC source saying the group expects a significant glut in oil in the coming months.

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