11th April 2011
So we are seeing an oil price that is not only sustaining its strength but is going higher. On Friday alone the Brent benchmark rose by US $4.32 or 3.52% and this meant that it has risen by just under 50% on a year ago. Most of the rally has taken place in more recent times as it has risen by a third since the start of 2011 and whilst there is so much unrest in North Africa and the Middle East it is unlikely to fall anytime soon.
There has been something of a decoupling between the two main crude oil benchmarks and I have switched to the Brent one because it now covers around two-thirds of world oil trading. Its predecessor as the main index which is called West Texas Intermediate stayed lower for longer but is beginning to catch-up as it has now risen to US $112 per barrel.
The Price of Oil an international and UK Perspective
Whilst the dollar price of oil gives us a benchmark any country which does not use the US dollar has to convert the price into its own currency before it can use it. The reason I raise this is that the rise in the oil price can be exacerbated or ameliorated by the movements in individual currencies. For UK readers this influence is negative as the current oil price in sterling for Brent crude is £77.20 per barrel which is an all-time high in nominal terms. In case you are wondering about 2008 when the price of oil last surged the pound spent most of the early to middle part of the year at around US $2 and our exchange rate now is a fair bit weaker.