Monday, April 4, 2011

Fears for global recovery as oil hits $120 mark

Oil has hit $120 per barrel for the first time since before the financial crisis – threatening global growth and putting the world at risk of an inflationary shock.

Brent crude, the London benchmark, had been trading around $115 per barrel for a fortnight, but the price has crept up over the past couple of days as the military action in Libya shows no sign of easy resolution. It closed at $121.06 – a two-and-a-half year high – on Monday.

A strike by oil workers in Gabon has also disrupted supply.

A number of analysts claim that $120 is the specific "danger point" at which the cost of oil starts to move above 5.5pc of total global economic output.

Deutsche Bank says this "has historically been an environment where global growth has come under pressure".

On top of this, estimates from the International Monetary Fund suggest that every extra $10 on the price of oil shaves 0.2pc off world growth. (read more)