Oil’s rally gathers momentum as Brent pops above $95 a barrel
Oil surged to a 10-month high — extending a powerful rally that may rekindle inflation — as supply cuts from OPEC+ tightened the market, with Saudi Arabia’s energy minister shying away from any change in course.
Global benchmark Brent topped $95 a barrel for the first time since November before paring gains. The tighter market has ignited a flurry of predictions that $100 oil could soon return in a roster than runs from industry heavyweights such as Chevron Corp. Chief Executive Officer Mike Wirth to traditional bears at Citigroup Inc.
The latest upswing has been marked by significant moves in timespreads, one of the market’s most-keenly tracked metrics. Brent’s three-month spread earlier ballooned to more than $4 a barrel in backwardation, a bullish pattern. That compares with a differential of $1.26 a barrel about a month ago.
Crude has soared by about a quarter since mid-June, with Riyadh and Moscow joining hands to curtail exports in a bid to drain inventories and drive a rebound in prices. An improving outlook in the world’s two biggest economies — the US and China — has also supported the advance. Oil’s relentless surge has been one of the standout features of commodity markets over the third quarter.
“Given the constructive fundamentals and more positive sentiment, we could see ICE Brent breaking above $100/bbl in the not-too-distant future,” ING said in an emailed report. “However, such a move would likely be unsustainable.”
On Monday, Saudi Arabia Energy Minister Prince Abdulaziz bin Salman told a conference in Canada that the Organization of Petroleum Exporting Countries was working to keep markets stable and improve energy security, without targeting a specific price. Output plans will be reviewed every month, he said.
The surge in energy costs looks set to boost inflationary pressures, complicating the task facing leading central bankers, many of whom have just presided over a punishing string of rate increases aimed at subduing price gains. It’ll be a big week for monetary-policy decisions, with multiple meetings, including one at the Federal Reserve.
The jump in oil also poses a challenge for the Biden administration ahead of presidential elections, with costlier crude feeding into more expensive gasoline, a key issue for some US voters. Average retail prices of the key motor fuel are already at a seasonal record in data going back to 2004.