Oil has rallied almost 60% this year as rebounding demand from economies recovering from the pandemic coincided with a tightening market after Russia’s invasion of Ukraine. The war has fanned inflation, driving up the cost of food to fuels and prompted aggressive monetary tightening from central banks.
OPEC+ last week agreed to accelerate output increases following repeated calls by the US to pump more. The producer group said it would add 648,000 barrels a day for July and August, about 50% more than the increases seen in recent months. However, the group has struggled recently to meet its supply targets, raising doubts about whether it would be able to meet the goal.
“Sentiment should remain decidedly bullish over the summer months,” said Stephen Brennock an analyst at brokerage PVM Oil Associates. “The rebound in oil demand coupled with the backdrop of inadequate supply has the makings for higher oil prices.”
The fuel market has also tightened considerably, just as the peak period for US demand kicks off with the summer driving season. Retail gasoline prices have rallied to a record, while futures in New York hit a fresh high on Monday.
Saudi Aramco raised its key Arab Light crude grade for Asian customers by $2.10 a barrel from June to $6.50 above the benchmark it uses. The market was expecting a boost of $1.50, according to a Bloomberg survey. Aramco also increased its prices for northwest Europe and Mediterranean regions.
Brent remains steeply backwardated, a bullish structure where near-dated contracts are more expensive than later-dated ones. The prompt timespread for the global benchmark was $2.76 a barrel in backwardation, compared with $2.69 on Friday. For WTI, the spread was $2.72.