Oil Wobbles Ahead Of OPEC Meeting, Supermarkets Face Pricing Questions

Published on
  • Brent Crude oil down to $100 per barrel ahead of OPEC+ meeting
  • UK’s major supermarkets failing to reduce petrol prices in line with falling wholesale costs
  • BA extends suspension of short haul flights from Heathrow

Jitters In The Oil Markets

There are jitters flowing through the oil market today, ahead of an OPEC+ meeting which is expected to bear little fruit when it comes to changing current output mandates. This feeds into anxieties about constrained supply which consumers and wholesalers are very well-versed in at this point. The interesting flipside is that anxieties about a petering of demand seem to be winning in the battle of sentiment. Very real questions about the health of the global economy mean demand for oil and gas could be in for a contraction that’s so sharp, the supply concerns are void. Continued volatility should be expected while these dual trains of thought continue, and consumers will welcome the reversal in prices to around $100 per barrel, against prices of around $124 as recently as March.

Get The Full Henry Singleton Series in PDF

Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q2 2022 hedge fund letters, conferences and more


The UK’s major supermarkets have been accused of failing to pass falling wholesale energy prices onto customers, stalling the speed at which people can benefit from the tempering of the oil price. Tesco, Asda, Morrisons and Sainsbury's have been accused of dropping their petrol prices by less than half the amount that wholesale prices have declined. As the cost-of-living crisis continues to clamp down on people’s incomes, this sort of headline is something these companies don’t need. Many have tried to align themselves as companies willing to help ordinary people who are struggling, by adjusting grocery pricing and quantities to ease the consumer crisis. Many will therefore be asking how the narrative can look so different at the pumps. At a business level, supermarkets were hampered during the pandemic when petrol prices famously dropped to under one pound, so these groups are arguably making up for these previous shortcomings.

The travel misery doesn’t stop here - British Airways has extended its suspension of selling short-haul flights from Heathrow. This comes after the well-publicised cap on passenger numbers introduced by the airport.

Customers are no doubt at a point where they care very little about the ongoing spat between Heathrow and the airlines and instead just want a solution and their long-awaited getaways. Looking at Boeing Co (NYSE:BA) from a shareholder’s point of view, this disruption doesn’t spell good news for parent company IAG (LON:IAG)’s cash profile. Paring down the flight schedule makes it harder to pay the very high level of non-flexible costs airlines have. As a long-haul specialist, BA’s path to recovery is more protracted than short-haulers too, so this added obstacle is magnified.”

Article By Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown

About Hargreaves Lansdown

Over 1.7 million clients trust us with £132.3 billion (as at 30 April 2022), making us the UK’s number one platform for private investors. More than 98% of client activity is done through our digital channels and over 600,000 access our mobile app each month.