Benchmark oil contract Brent North Sea hit its highest level since late 2014 on Thursday, breaching US$ 80 per barrel, with some market players predicting it could rise all the way to US$ 100. Higher oil prices, in turn, pushed the shares of energy firms in European stock markets higher, helping London's FTSE to set a new all-time high, and the Paris CAC to establish a fresh 2018 peak.
Wall Street recovered from early weakness to show small gains in late morning in New York. Brent North Sea crude for delivery in July jumped to US$ 80.50 in European afternoon trading, the highest level since November 2014, posting a gain of more than 1.3% from Wednesday.
The CEO of French oil giant Total said Thursday he wouldn't be surprised to see US$100 per barrel in the coming months.
We are in a new world. We are in a world where geopolitics are dominating the market again, Patrick Pouyanne said at an event held by a Washington think tank.
Global oil supplies could be hit by President Donald Trump's decision to pull the United States out of the Iran nuclear deal, and also by falling production in crisis-hit Venezuela, the International Energy Agency said on Wednesday.
Prior to Thursday's oil-price rally, crude futures had already risen thanks to steady demand growth and a landmark production cut deal. Oil's rise could meanwhile further push up inflation, impacting growth by quickening the pace of expected increases in interest rates.
Clearly the recent rise in oil prices is going to pose a problem for some central banks due to the temporary impact it will have on the inflation data, especially when you consider that in the past year, Brent crude prices are up more than 50%, Craig Erlam, senior market analyst at Oanda trading group said.
With markets expecting inflation to pick up pace, including for other reasons such as improved wages growth, 10-year US bond yields have hit seven-year highs, adding to expectations of a series of US rate hikes this year.
On currency markets, the dollar benefited from bets on higher US rates, keeping it around multi-month highs against its major peers.