A shortfall in global energy supplies affected crude markets earlier this week, pushing oil prices to their highest levels in three years, before heading lower.
This came as data showed US crude oil, gasoline and distillate inventories unexpectedly rose last week, as per the latest American Petroleum Institute figures.
A day earlier the price of oil per barrel had gone above $80 for the first time in around three years
“Oil prices had been rising in recent days, supported by rising demand as economies recover from the coronavirus pandemic and amid a power crisis in Europe and China, which would force governments to switch to crude oil to generate more electricity and meet their nations' needs,” said Naeem Aslam, chief market analyst at AvaTrade.
He added that last week's data showed a significant drop in stockpiles due to lower production by Gulf of Mexico refineries and rising demand.
Traders expect that Organization of the Petroleum Exporting Countries (OPEC) and its allies will decide to keep supplies tight when they meet next week.
OPEC has forecast that oil demand will grow sharply in the next few years as economies recover from the pandemic. It also warned that that the world needed to keep investing in production even as it switches to green energy.
Record gas prices because of a shortfall in global production are feeding back into oil markets and are expected to push crude higher.
White House press secretary Jen Psaki told reporters, "We’re not only engaged with OPEC, we’re looking at every means we have to lower gas prices or address the cost of oil."
China, the world’s number one oil importer and second-biggest user after the US, is experiencing a weakening housing market and growing power outages. This has also hit investor sentiment as any fallout in its economy would likely impact oil demand.
Meanwhile a fuel supply crisis has forced the UK government to draft in the army as long queues at petrol stations head into their fourth day.
Shell's (RDSB.L) stock was down 1.9%. This comes as it was reported Shell's UK power retail business Shell Energy will grow by more than a quarter after it took on 255,000 customers from Green Supplier Limited, which defaulted following the recent surge in natural gas prices.
Last week, Shell agreed to a $9.5bn sale of its Permian Basin assets to ConocoPhillips (COP).
Meanwhile BP (BP.L) had to temporarily closed some of its petrol forecourts in Britain after it had issues transporting fuel due to an industry wide shortage of lorry drivers. Its shares were down 1.6% on Wednesday morning. It's share price was down 1.6%.
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