World oil price hits $100

Luke Wilson (0:00)

Oil climbs above $100 a barrel as tensions escalate in the Middle East. It's World Business Express from the BBC World Service. I'm Luke Wilson.

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There are growing fears over global energy supplies after the price of Brent crude oil rose above $100 a barrel for the first time since July. While that's some way off the $120 it hit in April, it's well above the $70 it was trading out before the conflict started. It comes after US forces struck five Iranian tankers yesterday. US Central Command said this was in response to Tehran twice targeting an American warship. And it's not just oil. Natural gas prices are at their highest level in nearly four years. So where does this leave parts of the world, like Europe, that are heading into winter? Florence Schmidt is Senior Energy Strategist at the financial services company Rabobank.

Florence Schmidt (1:09)

We have had $100 per barrel crude oil prices already earlier this year. Actually we had prices at $120. Then they briefly dropped back to $70 when there were all these talks about the memorandum of understanding. And now we're back at $100. So it is certainly a rather worrying outlook that energy prices are higher again, but it's actually not crude oil prices that we should be looking at, but it's the products that we consume that are made from crude oil, the diesel, the gasoline, the jet fuel that are more worrying.

Luke Wilson (1:40)

And as you say, the $100 a barrel getting the headlines, but natural gas prices, they're quite elevated as well, aren't they?

Florence Schmidt (1:48)

I mean, they're more than just elevated. Natural gas prices are almost close to 80 euro per megawatt hour. The last time they reached this level was in December 2022

Luke Wilson (2:00)

And for places like Europe that are about to head into winter, what does that mean for energy costs?

Florence Schmidt (2:06)

It means that we will have high energy prices for all of this winter, because a lot of people involved in this were having that the war would end already this year, and with it, energy flows through the Strait Herb Removes would improve. That hasn't happened and seems now very unlikely to happen in this year. And that means you go into a year with curtailed energy flows and higher prices. And that also means that consumers will have to face higher prices. And so we're going to a winter with high prices for anything from transport fuels to heating fuels as well.

Luke Wilson (2:38)

And there's also a question of storage, isn't there? Are places like Europe heading into this winter not in the best position when it comes to having oil and gas storage in place?

Florence Schmidt (2:50)

Storages for key energy products, those have been more depleted this year than what is normally the case. You're importing, for example, your diesel or your liquefied natural gas from the US right now. But this will come at a higher cost because you're, of course, competing on the global market for the limited amount of fuel. While you cannot reliably rely on your own storages because they are just very low.

Luke Wilson (3:14)

Florian Schmitt from Rabobank. Listening to that is Russ Mould, Investment Director at AJ Bell. And where are we with the oil price now, Russ?

Russ Mould (3:22)

Hello, Luke. So the Brent benchmark for one month delivery is 100 US dollars a barrel almost exactly. It's high since late July. Amid worries over the strata for Moose, Hootie tax on Saudi Arabia, and also falling US strategic reserves, also keep an eye on refined products, where in America, gasoline and diesel prices are up by one-third and two-thirds respectively in barely a month.

Luke Wilson (3:45)

And this feeds into inflation, how fast prices are rising. Are central banks going to be worried about this?

Russ Mould (3:50)

Yes, they are. And the European Central Bank meets on Thursday, and that is expected to raise interest rates by a quarter of a percentage point. That sets the scene for the US Federal Reserve next Wednesday, 60% chance of an increase, and the Bank of England next Thursday.

Luke Wilson (4:04)

Russ Mould, Investment Director at AJ Bell, thank you.

The US is expanding its trade restrictions on Canadian goods to include outright import bans on alcohol, dairy products and motorbikes. President Trump accused Canada of discriminating against the US after it implemented retaliatory dollar-for-dollar tariffs on Tuesday. The new American restrictions, along with tariffs on more Canadian products, take effect at the end of the month. Both sides say they want a trade deal, but there have been no talk since negotiations collapsed in late August.