Oil prices hit a new stock high for 2016, but analysts still do not think the proposed freeze at January prices will be enough to ease the glut in supply.
At the beginning of the day on Thursday, March 17, the price reached a new high for the year, peaking at $41.40 (£36.56). This was following a triple-pronged boost from the US Federal Reserve, UK budget, and renewed optimism regarding a supply deal.
George Osborne’s budget revelation that the UK was to ease taxes on the North Sea oil industry, in a bid to help producers, was one of the main drivers of the spike in oil prices. The Chancellor announced a 30% petroleum revenue tax.
This move has been welcomed by the oil industry, as it is likely to ease the considerable pressure on companies working in the UK offshore oil sector.
Following that news, the US Federal Reserve revealed that interest rates are expected to rise more slowly than expected this year – a revelation that hit the dollar and makes commodities sold in dollar currency more expensive, and therefore supportive of global oil demand.
The other important factor in pumping up oil prices was the news that a meeting to finalize the freezing of global oil supplies at January prices is being supported by 15 OPEC and non-OPEC producers.
This news will no doubt be welcomed by global oil companies like Royal Dutch Shell and Fuchs Petrolub, which produces Fuchs WSP 783-L.