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How are oil prices impacting on the UK Building Material Market

How are oil prices impacting on the UK Building Material Market?

While global oil prices may have closed 2020 near the average for 2015-2017 ($52 per barrel), this relatively happy ending masks an incredibly volatile and turbulent 12 months.

After all, April saw US crude plunge into negative territory, while the price of Brent declined below the $20 per barrel mark as demand collapsed in the wake of the coronavirus pandemic and subsequent lockdown measures.

Of course, this issue was exacerbated by a price and production war between Saudi Arabia and Russia, with the second-half of 2020 spent recovering from this significant trough. But how have recent price shifts impacted on the construction industry and the supply of building materials?

Exploring the Wider Impact of Falling Oil Prices

From a wider perspective, the recent ascent of oil prices (which has coincided with a decline in Covid-19 cases across the globe amid various vaccine rollouts), has had a direct impact on energy prices and stock performance.

This also ties into the effect on building materials suppliers, 90% of whom have said that the cost of all raw materials has increased incrementally through the first half of 2021.

More specifically, the relative recovery in global oil prices has triggered a gradual hike in energy costs, with 73% of heavy-side firms and 51% of light-side suppliers reporting a noticeable increase in this regard.

Rising energy prices have also impacted on the stock market, primarily by propelling large-cap energy stocks to the top of the S&P 500 so far in 2021.

In fact, the S&P 500’s lucrative energy sector has climbed by 44.5% since the start of 2021 through June 11th, compared with growth of just 13.08% across the S&P 500 Index as a whole.

Over the same period in 2020, the S&P 500 dropped approximately 7% of its total value, while large-cap energy firms saw their prices decline by 36.2% overall.

The Impact on Construction and Materials Suppliers

Clearly, changing oil prices have a significant and far-reaching impact across the globe, while the real-time value of this commodity is also heavily-influenced by the actions of individual traders.

They certainly have a direct impact on market sentiment and daily trading volumes, while professional traders also have a clear insight into daily price changes through resources such as the MT4 online platform.

We’ve already touched on the impact of rising oil prices on energy costs and raw building materials, while the supply of such items throughout the UK construction sector remains under considerable pressure overall.

In fact, the BCIS Materials Cost Index shows that, provisionally, materials prices increased by 2.7% through Q1, 2021, and by 5.6% when compared to the previous year. Forecasts hint at this trend continuing through Q2, with a quarterly increase of 2.6% and an annual hike of 7.2% predicted by experts.

The cost of imported materials remains most concerning here, and there’s no doubt that this could impact on productivity in the construction sector if this trend continues over time.

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