Oil hit a three-month high on Monday as demand is rebounding from the pandemic and a significant tightening of the market after Russia’s invasion of Ukraine. The Bloomberg Spot Commodity Index began the week by rising to a record, mostly driven by natural gas and wheat due to renewed supply fears.
“With supply being this tight, prices will likely need to go higher in order to kill demand and balance the market,” said Ole Hansen head of commodities research at Saxo Bank A/S.
The war in Ukraine has fanned inflation, boosting the price of everything from food to fuels. The US is grappling with record pump prices at the start of its summer driving season, typically a period of peak demand, while developing nations are suffering from the rising cost of energy.
- WTI for July delivery rose 0.2% to $118.71 a barrel at 9:56 a.m. in London.
- Brent for August settlement gained 0.1% to $119.57 a barrel.
The oil market will likely be in a deficit of 500,000 barrels a day in the second half of the year, Morgan Stanley analysts Martijn Rats and Amy Sergeant wrote in a report. Goldman wrote in a note that the market remains in a structural deficit and was even tighter than expected in April. The bank increased its third quarter price forecast for global benchmark Brent to $140 a barrel and its estimate for WTI to $137 for the same period.