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The global benchmark oil price has topped $90 a barrel for the first time since October as flaring tensions in the Middle East exacerbate an already-tight market.
Brent crude oil futures rose 1.5 per cent on Thursday to settle at $90.65 a barrel as traders weighed the potential for Iran’s backlash after a suspected Israeli attack on its consulate in Damascus.
Prices had been climbing steadily this year as healthy economic data from big economies such as the US and China point to further increases in global demand at a time when producers in the Saudi Arabia-led Opec+ alliance continue to constrain supply.
Giovanni Staunovo, a commodity analyst at Swiss bank UBS, said: “We believe the latest price increase has been driven by renewed geopolitical tensions in the Middle East, but fundamentals like better than expected demand and lower oil production have also helped.
Prices have blown through analysts’ median forecast of $83 a barrel for this quarter, according to Bloomberg data.
Rory Johnston, head of consultancy Commodity Context, said: “Brent finally breaking above $90 a barrel, which has been a point of resistance, for the first time since October signalled a breakout” that caused traders to further crowd into bullish positions.
“With oil outlooks continuing to be revised tighter and the geopolitical backdrop getting ever more tense, it wouldn’t — and clearly didn’t — take much for a small rally to gain pile-on momentum,” Johnston added.
The surge in oil prices complicates central banks’ efforts across the world to tamp down on rising prices. It comes a day after US Federal Reserve chair Jay Powell said the bank’s battle with inflation was “not yet done”.
Staunovo at UBS said: “Higher energy prices could become a concern for financial markets if it would further delay the start of interest rates cut by key central banks.”
The US Department of Energy on Wednesday said it was cancelling its latest plans to purchase oil to refill the nation’s emergency crude stockpile amid the rise in prices. The Strategic Petroleum Reserve has been drawn down in recent years to offset shortfalls sparked by Russia’s invasion of Ukraine.
The rise in crude prices has contributed to increasing petrol prices ahead of the summer driving season that begins next month. The uptick has become a mounting source of concern in the White House as November’s presidential election looms. Washington recently warned Ukraine to call off strikes on Russian oil refineries over fears it could fuel the oil price rally.