The extended climb in oil prices is leaving some other industrial commodities behind, a divergence that reflects bets that energy supply shortages will offset any slowdown in the global economy.
U.S. crude rose more than 2% early Monday to a seven-year high of $81.50 a barrel, bringing its climb since the end of last October to more than 120%. If sustained, it will be the first time the U.S. oil benchmark closes above $80 a barrel since October 2014, when the shale revolution set off a multiyear slump in fossil-fuel prices.
Oil is now on track to outpace copper this year by the largest amount since 2002 and is topping an index of raw materials by the biggest margin in more than a decade, according to Dow Jones Market Data. Like oil, natural gas is also far outpacing other commodities.
Copper prices are about 10% below a May record, while rallies in some other materials such as zinc and lead have largely stalled.
Some industrial metals have fallen due to fears of softening growth in China, the world’s biggest commodities consumer and largest oil importer. Economic fallout from the impending collapse of indebted property developer China Evergrande Group could magnify the slowdown caused by the Delta variant of the coronavirus, traders say. That is because the Chinese economy is heavily reliant on real-estate developers for growth and jobs.
Crude’s persistent rise in the face of those growth concerns shows the extent to which many traders expect weak supply to buoy prices, lifting fuel costs for consumers and businesses. Energy supply shortages are slowing factory activity around the world and contributing to a recent pickup in inflation. Worries about accelerating consumer prices and climbing government-bond yields have in turn sparked volatility in U.S. stocks in recent weeks.
Even if fewer consumers travel and consume fuel, many analysts project that tumbling investment in new supply by energy companies will prop up oil prices. Investors are pressuring companies, including Pioneer Natural Resources Co. and Occidental Petroleum Corp. , to limit spending and environmental damage while returning money to shareholders.