Brent crude climbs above $116 as Middle East tensions keep fuel prices high
Brent crude settled at $116.72 a barrel, its highest level since April, while Australian fuel prices remain elevated and officials warn the price surge may persist until 2030.
Brent crude futures settled at $116.72 a barrel on Friday, the highest level since April, after Houthi attacks on Saudi Arabia and an oil spill reported by UAE authorities raised concerns about further supply disruptions. CommSec equity market strategist James Gruber said the price rise reflected a near six-month high in oil markets.
Australian retail fuel prices, which track international refined-fuel benchmarks, averaged 236.2 cents per litre in the country’s five largest cities on Friday, a drop of 5.7 cents from the previous week but still 65.3 cents higher than prices recorded on 20 February, before the Middle East conflict intensified.
AMP deputy chief economist Diana Mousina noted that brief optimism from a potential U.S.–Iran deal had temporarily eased price pressure, but the outlook shifted after reports that the United States might resume strikes following the mid-term elections and ongoing Houthi attacks on Saudi Arabia.
Treasurer Jim Chalmers told the Citi A50 Economic Forum that oil prices are unlikely to return to pre-conflict levels before the end of the decade, citing Brent’s recent trading above $100 a barrel for six weeks and reaching $110 this week. He added that higher global oil prices have contributed to a 4% inflation rate over the year to August, with Australian automotive fuel prices up 14.8% in the same period.
The latest price surge comes ahead of Australia’s third-quarter inflation report and the Reserve Bank of Australia’s November meeting. Markets are pricing in a 65% probability of a 25-basis-point rate hike, up from 23% a week earlier, according to Gruber. The U.S. Federal Reserve is also expected to hold rates steady after its September increase.
"Markets aren’t expecting very big jumps like in those countries I’ve just mentioned but they’re not expecting inflation to go down yet either," Chalmers said.
International inflation data show modest increases in the United States, Germany, the United Kingdom, France and Italy, while the IMF’s World Economic Outlook projects continued global inflation growth this year, prompting expectations of multiple interest-rate hikes in major advanced economies over the next twelve months.