Oil jumps above $80

LONDON: Brent crude oil jumped above $80/barrel on Tuesday for the first time in almost three years on the expectations for surging demand and concerns about tight supplies, as the world slowly emerges from the pandemic crisis.

The stock markets mostly dropped, as traders tracked a strengthening dollar, high oil prices, political impasse in Germany and US debt concerns.

Europe’s biggest economy Germany was meanwhile headed for weeks, if not months, of protracted coalition haggling following weekend elections.

Chancellor Angela Merkel’s conservatives have insisted on trying to form a government even after losing to the Social Democrats in a tight race.

Elsewhere, fears over the possible collapse of troubled Chinese developer Evergrande have abated for now, though the crisis is being closely followed.

Analysts said concerns that an energy crunch in China could hit growth in the world’s number two economy were adding to the downbeat mood, with Goldman Sachs lowering its outlook for this year.

“While each country appears to be struggling with their own mix of issues, the ongoing squeeze on energy supply has helped drive fuels sharply higher across the board,” said Joshua Mahony, senior market analyst at IG trading group.

“While many investors have spent their time diversifying towards green energy and away from fossil fuels, we are instead seeing that lack of production and persistent demand drive up the likes of crude, coal, and gasoline in recent weeks.”

Adding to the sense of unease among investors is the drawn-out debt limit saga in Washington, where Republicans have blocked a Democrat move to raise the US borrowing limit, meaning the government will likely run out of cash at the end of the week.

But more worryingly, the country could default on its debt obligations next month, which most observers say would spark a massive financial crisis, with Republicans saying they will refuse to pay for Democrats’ spending plans.

Several top officials including Treasury Secretary Janet Yellen and Fed chief Jerome Powell have urged politicians to step back from the brink and lift the limit.

The brewing crisis comes as Democrats fight to pass President Joe Biden’s multi-trillion-dollar infrastructure and social spending bills, with the party infighting fuelling concerns that the president’s agenda could end up dead in the water.