A photo of an Esso petrol station forecourt in the UK. Image source: Images Money, flickr.com
Petrol Panic-Buying in Britain Could Drive the Price of Brent Oil to Multi-Years High
The energy market is rattled by the latest dose of global supply bottlenecks, which affects the underlying supply and demand equilibrium. Even though the most significant impact is felt on the price of Brent oil, the fallout affects U.S. oil as well. Read more about the broader market sentiment on crude from our latest analysis of the commodity.
Britons started panic-buying petrol from gas stations all over the UK as new ruptures along the supply chains are causing fears of mass petrol shortages. The crisis emerged over the weekend when the Petrol Retailers Association (PRA) reported that nearly two-thirds of gas stations have run out of petrol. The massive upsurge in demand has driven the price of Brent oil to fresh multi-year highs.
Brent Oil 1M Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the monthly chart above, the sudden bullish rebound in the price of Brent oil is serving as an attempted breakout above the descending trend line (in black). This resistance was established in the wake of the 2008 credit crunch, which attests to its significance.
Moreover, the recent peak coincides with one other major resistance (the last swing high) at 80.00, which also bears significant psychological importance. All of these factors mean that the price action finds itself at a major make-it-or-break-it threshold.
The strong bullish bias in the market is further confirmed by the fact that the price action strengthened above the 38.2 per cent Fibonacci retracement level at 66.31 and the 100-day MA (in blue). Moreover, it is also breaking the 200-day MA (in orange).
If a decisive breakout above the descending trend line occurs next, the rally may then head towards the 61.8 per cent Fibonacci at 97.24 by the end of the year. Its close proximity to the 100.00 mark makes it an even more prominent psychological threshold. Conversely, a reversal from the trend line could potentially lead to a pullback towards the 38.2 per cent Fibonacci.
What causes the panic-buying?
The primary reason for the supply shortage is the lack of drivers who can transport petrol to retailers, as was pointed out by BP last week. This means that at its heart, the crisis is not caused by a lack of supply but rather due to distortions along the supply route.
Energy crunch gets crunchier, bonds drop, and more U.S. shutdown brinksmanship
— Bloomberg (@business) September 28, 2021
Here’s what’s moving markets ⬇️ https://t.co/QMPfnXqoAk
The lack of drivers is yet another Brexit ripple that Boris Johnson's cabinet has to tackle amidst growing concerns over the Delta variant.
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