Brent crude surpasses $120 a barrel

Brent crude is on course for a sixth straight monthly climb, in what would be the longest such run in more than a decade. The advance has been driven by the fallout from the war in Ukraine, as well as increased demand as more economies return from Covid-19-related restrictions.

In the US, the summer driving season kicked off at the weekend with retail petrol prices surging to a record.

According to GasBuddy data, weekly US petrol demand rose 0.5% during Saturday and Sunday compared with the previous week and was 1.2% above the average of the past four weeks.

“It’s tight supply, Chinese demand and the beginning of the US driving season in focus,” said Ole Hansen, head of commodities strategy at Saxo Bank. At the same time, Opec+ has fallen behind production targets and is struggling to meet quotas. 

China’s dogged adherence to its zero-Covid-19 policy at all costs — epitomised by Shanghai’s lockdown that began in late March — has sapped energy demand, and an easing would help to support global consumption. Administration officials have both warned of the economic damage stemming from the curbs, and pledged support to offset the impact.

With a meeting due this week of the oil cartel Opec and allies on supply policy, leading member Saudi Arabia is expected to boost its official July prices. Saudi Aramco may raise Arab Light for sales to Asia next month by $1.50 a barrel, a Bloomberg survey showed.

The oil market is steeply backwardated, a bullish pattern marked by near-term prices trading at a premium to longer-dated ones. Brent’s prompt spread — the difference between its two nearest contracts — was $3.71 a barrel on Monday, up from $1.34 a barrel three weeks ago.

The surge in energy prices has contributed to a sharp pickup in the pace of inflation, spurring central bankers to move towards tighter monetary policy. Data this week will likely show record price gains in European economies.

Bloomberg News.  More stories like this are available on bloomberg.com